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India Equity Research Reports, IPO and Stock News
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We recently met Indian, Chinese and Korean vendors in the T&D space to get a sense of ordering activity (especially
PGCIL) and competitive intensity in the T&D space. Ordering seems to be peaking, with awards from PGCIL likely to
remain largely flat in the next 2-3 years and awards from SEBs/ industry slowing. Competitive intensity aggravated in
FY12, particularly in the 765kva transformer, reactor, and substation segments. PGCIL data reveals that incumbents like
Crompton and ABB have lost market share in the transformer and reactor space as also in substations over the past
two years. Moreover, the Chinese are setting up capacity in India, while players like Transformers & Reactors India
(TRIL) are increasing capacity to enter the 765kva segment. With the overall ordering activity expected to be largely flat,
we see competitive pressure rising and utilization levels under pressure. On the other hand, competitive intensity in the
transmission-line space has reduced since February 2011 with PGCIL having rejected bids by many players for nonperformance
(17% of the bids in FY12 rejected). Consequently, we like transmission line/ tower players as they face
little competition from international companies and possess a diversified geographical mix of revenues (~50% from
international markets). So, we reiterate Outperformer on KEC (7.4x FY13E earnings), Kalpataru (7.2x FY13E earnings)
and Jyoti Structures (3.9x FY13E earnings). However, given rich valuations and risk to earnings of transformer players,
we reiterate Crompton (13.5x FY13E earnings) and ABB (52.5x CY13E earnings) as Underperformer and EMCO (21.9x
FY13E earnings) as Neutral.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We recently met Indian, Chinese and Korean vendors in the T&D space to get a sense of ordering activity (especially
PGCIL) and competitive intensity in the T&D space. Ordering seems to be peaking, with awards from PGCIL likely to
remain largely flat in the next 2-3 years and awards from SEBs/ industry slowing. Competitive intensity aggravated in
FY12, particularly in the 765kva transformer, reactor, and substation segments. PGCIL data reveals that incumbents like
Crompton and ABB have lost market share in the transformer and reactor space as also in substations over the past
two years. Moreover, the Chinese are setting up capacity in India, while players like Transformers & Reactors India
(TRIL) are increasing capacity to enter the 765kva segment. With the overall ordering activity expected to be largely flat,
we see competitive pressure rising and utilization levels under pressure. On the other hand, competitive intensity in the
transmission-line space has reduced since February 2011 with PGCIL having rejected bids by many players for nonperformance
(17% of the bids in FY12 rejected). Consequently, we like transmission line/ tower players as they face
little competition from international companies and possess a diversified geographical mix of revenues (~50% from
international markets). So, we reiterate Outperformer on KEC (7.4x FY13E earnings), Kalpataru (7.2x FY13E earnings)
and Jyoti Structures (3.9x FY13E earnings). However, given rich valuations and risk to earnings of transformer players,
we reiterate Crompton (13.5x FY13E earnings) and ABB (52.5x CY13E earnings) as Underperformer and EMCO (21.9x
FY13E earnings) as Neutral.
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