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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight01032012.pdf
BGR ENERGY SYSTEMS
PRICE: RS.368 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.394 FY13E P/E: 12.1X
q BGR Energy emerged as a lowest bidder for 11X660MW NTPC bulk tender
for boilers.
q This order win is quite positive for the company since it had already
emerged as lowest bidder in turbine and generator for NTPC's 9X800 MW
tender. It thus marks the entry of company in the super critical space in
the entire BTG category.
q We improve our order inflow estimates for the company and marginally
tweak our estimates. Though largely revenue booking from this order is
expected to start only from FY14, but it results in re-rating for the stock.
q We thus arrive at a revised price target of Rs 394 on FY13 estimates (Rs
273 earlier) and continue to maintain ACCUMULATE on the stock.
Key highlights about the company
BGR energy emerged as a lowest bidder for 11X660MW NTPC
bulk tender for boilers
NTPC had opened the bids for 11X660MW bulk tender for boilers and BGR has
emerged as the lowest bidder for boilers. Company had placed the bid at Rs 14 mn
per MW for boiler. Though company's bid was lower than the price quoted by
Doosan (Rs. 16.4mn) for the NTPC II (9 x 800MW) bulk tender but company mentions that there is a difference of 30-35% in the quotations of 800MW and 660MW
projects as per international price bids.
BGR energy would get 7X660MW from NTPC which would be spread across one
3X660 MW and two 2X660MW units. This would involve import of nearly 40% due
to Hitachi supply and also due to raw material requirement for the boiler JV. Import
component may be limited to 2 units and once its boiler facility is ready, JV will
manufacture from third unit onwards.
Details of 11X660 MW bulk tender - NTPC 11X660MW bulk tender
Project State Capacity (MW)
Mouda UP 2X660
Solapur Maharashtra 2X660
Nabinagar Bihar 3X660
Meja UP 2X660
Ragunathpur WB 2X660
Total 7,260
Source: Company
BGR energy is setting up units for manufacturing super critical steam turbine and
generator as well as boilers in joint venture with Hitachi for around 5000MW. BGR
owns 74% stake in the JV while Hitachi owns the rest. Company expects an overall
equity investment of nearly Rs 9 bn to be invested in this JV. Out of this amount,
company has already invested nearly Rs 2.5 bn till now and expects to invest Rs 2.5
- 3 bn in FY13. Land acquisition is already done for this JV and sanctions form financial institutions are likely to be finalized in two months. Thus construction work is
likely to commence from May, 2012.
Valuation and recommendation
n BGR is currently trading at 11.9x and 12.1x P/E and 7.7x and 9.2x EV/EBITDA on
FY12 and FY13 estimates respectively.
n Due to lack of order inflows as well as intense competition, sector had witnessed
a de-rating. However, we believe that concerns related to order inflow, coal
availability, land acquisition are slowly getting addressed and hence with improvement in order inflows for the company, stock is likely to get re-rated.
n We thus arrive at a revised price target of Rs 394 based on 13x FY13 estimated
earnings (Rs 273 based on 10x FY13 estimated earnings earlier) and continue to
maintain ACCUMULATE recommendation on the stock and would advise investors to look at declines to buy the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight01032012.pdf
BGR ENERGY SYSTEMS
PRICE: RS.368 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.394 FY13E P/E: 12.1X
q BGR Energy emerged as a lowest bidder for 11X660MW NTPC bulk tender
for boilers.
q This order win is quite positive for the company since it had already
emerged as lowest bidder in turbine and generator for NTPC's 9X800 MW
tender. It thus marks the entry of company in the super critical space in
the entire BTG category.
q We improve our order inflow estimates for the company and marginally
tweak our estimates. Though largely revenue booking from this order is
expected to start only from FY14, but it results in re-rating for the stock.
q We thus arrive at a revised price target of Rs 394 on FY13 estimates (Rs
273 earlier) and continue to maintain ACCUMULATE on the stock.
Key highlights about the company
BGR energy emerged as a lowest bidder for 11X660MW NTPC
bulk tender for boilers
NTPC had opened the bids for 11X660MW bulk tender for boilers and BGR has
emerged as the lowest bidder for boilers. Company had placed the bid at Rs 14 mn
per MW for boiler. Though company's bid was lower than the price quoted by
Doosan (Rs. 16.4mn) for the NTPC II (9 x 800MW) bulk tender but company mentions that there is a difference of 30-35% in the quotations of 800MW and 660MW
projects as per international price bids.
BGR energy would get 7X660MW from NTPC which would be spread across one
3X660 MW and two 2X660MW units. This would involve import of nearly 40% due
to Hitachi supply and also due to raw material requirement for the boiler JV. Import
component may be limited to 2 units and once its boiler facility is ready, JV will
manufacture from third unit onwards.
Details of 11X660 MW bulk tender - NTPC 11X660MW bulk tender
Project State Capacity (MW)
Mouda UP 2X660
Solapur Maharashtra 2X660
Nabinagar Bihar 3X660
Meja UP 2X660
Ragunathpur WB 2X660
Total 7,260
Source: Company
BGR energy is setting up units for manufacturing super critical steam turbine and
generator as well as boilers in joint venture with Hitachi for around 5000MW. BGR
owns 74% stake in the JV while Hitachi owns the rest. Company expects an overall
equity investment of nearly Rs 9 bn to be invested in this JV. Out of this amount,
company has already invested nearly Rs 2.5 bn till now and expects to invest Rs 2.5
- 3 bn in FY13. Land acquisition is already done for this JV and sanctions form financial institutions are likely to be finalized in two months. Thus construction work is
likely to commence from May, 2012.
Valuation and recommendation
n BGR is currently trading at 11.9x and 12.1x P/E and 7.7x and 9.2x EV/EBITDA on
FY12 and FY13 estimates respectively.
n Due to lack of order inflows as well as intense competition, sector had witnessed
a de-rating. However, we believe that concerns related to order inflow, coal
availability, land acquisition are slowly getting addressed and hence with improvement in order inflows for the company, stock is likely to get re-rated.
n We thus arrive at a revised price target of Rs 394 based on 13x FY13 estimated
earnings (Rs 273 based on 10x FY13 estimated earnings earlier) and continue to
maintain ACCUMULATE recommendation on the stock and would advise investors to look at declines to buy the stock.
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