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India Equity Research Reports, IPO and Stock News
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http://www.kotaksecurities.com/pdf/dmb/MorningInsight28032012.pdf
T&D EQUIPMENT SECTOR UPDATE
Analysis of tenders awarded by PGCIL indicates that ordering in FY12 has
been healthy possibly due to it being the final year of the 11th plan period.
However, our interaction with an industry player suggests that PGCIL
ordering may decline in FY13 as it being the first year of the 12th plan
period.
Equipment prices have fallen sharply in recent tenders especially in the
higher rating of 765 KV transformers and reactors. Chinese companies have
made a major headway in winning orders in this segment.
We continue to maintain a negative outlook on the sector in view of intense
price competition from domestic and foreign players as well as sluggish
market growth for T&D. We maintain negative bias for ABB (Reduce with
Target Price of Rs 670), Siemens (Reduce with Target Price of Rs 780),
Crompton Greaves (Reduce with Target Price of Rs 130), Alstom T&D (Reduce
with Target Price of Rs 158).
Equipment prices in 765 KV range have come under pressure
n Ordering from PGCIL has remained strong in Apr-Feb 2012 as the company nears
end of the XIth plan period.
n In 11M-YTD FY12, the central transmission utility placed orders worth Rs 145 bn
vs Rs 92.9 bn in the corresponding period of the previous fiscal. However, this is
not a cause for cheer as indications are that PGCIL ordering is likely to peak out
in FY12 and there could be a period of slack in the initial phase of the 12th plan
period.
n The BTG market in the power generation had already slowed down in FY11-12
and its lag impact on the T&D market has begun to feel now.
n The private sector demand for T&D equipment continues to remain morose.
While there are projects coming up from the state electricity boards, these could
face funding issues as banks have turned cautious on lending to SEBs. Change of
state governments is also a risk as orders awarded by previous government could
be reviewed/cancelled. There is already indication of a large T&D order being
cancelled in UP.
n We also understand that product pricing is under severe stress and likely to remain so in the foreseeable future. This is especially so in the higher range of
transformer ie 765 KV.
n There has been significant increase in competition from Chinese players. This is
also corroborated by our findings from the PGCIL ordering trend in February
2012. Chinese companies like TBEA and Baoding have won 765 KV reactor orders worth Rs 5.9 bn accounting for 87% of the total ordering in the segment in
February.
n Interactions suggest that TBEA has become aggressive in bidding as its manufacturing facility in India is expected to come onstream by the end of CY12.
n Bulk of the order awards were accounted by the transmission line tower segment
at 57%. The competition in the transmission towers segment continued to remain strong with many as 17 players announcing order wins. Having said that,
top five players accounted for 63% of the ordering on the transmission line towers business. Tata Projects was the leading contractor with a 19% share in AprFeb 2012 period.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight28032012.pdf
T&D EQUIPMENT SECTOR UPDATE
Analysis of tenders awarded by PGCIL indicates that ordering in FY12 has
been healthy possibly due to it being the final year of the 11th plan period.
However, our interaction with an industry player suggests that PGCIL
ordering may decline in FY13 as it being the first year of the 12th plan
period.
Equipment prices have fallen sharply in recent tenders especially in the
higher rating of 765 KV transformers and reactors. Chinese companies have
made a major headway in winning orders in this segment.
We continue to maintain a negative outlook on the sector in view of intense
price competition from domestic and foreign players as well as sluggish
market growth for T&D. We maintain negative bias for ABB (Reduce with
Target Price of Rs 670), Siemens (Reduce with Target Price of Rs 780),
Crompton Greaves (Reduce with Target Price of Rs 130), Alstom T&D (Reduce
with Target Price of Rs 158).
Equipment prices in 765 KV range have come under pressure
n Ordering from PGCIL has remained strong in Apr-Feb 2012 as the company nears
end of the XIth plan period.
n In 11M-YTD FY12, the central transmission utility placed orders worth Rs 145 bn
vs Rs 92.9 bn in the corresponding period of the previous fiscal. However, this is
not a cause for cheer as indications are that PGCIL ordering is likely to peak out
in FY12 and there could be a period of slack in the initial phase of the 12th plan
period.
n The BTG market in the power generation had already slowed down in FY11-12
and its lag impact on the T&D market has begun to feel now.
n The private sector demand for T&D equipment continues to remain morose.
While there are projects coming up from the state electricity boards, these could
face funding issues as banks have turned cautious on lending to SEBs. Change of
state governments is also a risk as orders awarded by previous government could
be reviewed/cancelled. There is already indication of a large T&D order being
cancelled in UP.
n We also understand that product pricing is under severe stress and likely to remain so in the foreseeable future. This is especially so in the higher range of
transformer ie 765 KV.
n There has been significant increase in competition from Chinese players. This is
also corroborated by our findings from the PGCIL ordering trend in February
2012. Chinese companies like TBEA and Baoding have won 765 KV reactor orders worth Rs 5.9 bn accounting for 87% of the total ordering in the segment in
February.
n Interactions suggest that TBEA has become aggressive in bidding as its manufacturing facility in India is expected to come onstream by the end of CY12.
n Bulk of the order awards were accounted by the transmission line tower segment
at 57%. The competition in the transmission towers segment continued to remain strong with many as 17 players announcing order wins. Having said that,
top five players accounted for 63% of the ordering on the transmission line towers business. Tata Projects was the leading contractor with a 19% share in AprFeb 2012 period.
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