Crompton Greaves (CG) has acquired 100% of ZIV (global leader in high value smart grid and automation solutions segments for industrial and utilities companies) for an enterprise value equivalent to EUR150mn. ZIV is a provider of digital equipment for Grid Automation and Advanced Metering Infrastructure (AMI). The company operates in more than 50 countries, with major operations located in Brazil (Rio de Janeiro), India (Bengaluru), Spain (Madrid, Barcelona, Bilbao) and US (Chicago). It has installed more than 1.4 mn IEDs for utilities and industries across the world. We await further clarity from CG on key valuation rationale and financials of ZIV, post which we will release a detailed note (refer next page for CG’s acquisition history).
��
Acquisition addresses critical gaps in power systems
As we understand, CG’s biggest gap was in relays and control panels. The ZIV acquisition will address this gap and help the company make significant presence in the systems business in key global markets. The company acquired Microsol (in May 2007) which provided access to RTUs (Remote Terminal Units). In our opinion, access to control and relay panels (heart of a substation) is a critical gap that CG has bridged through this acquisition, apart from other products in the SMARTGRID vertical.
Outlook and valuations: Positive strategic move; Maintain ‘BUY’
We believe this is a positive move from a long term perspective but await clarity from CG regarding valuation rationale at which ZIV is acquired and key financials of the company, and will release a detailed note thereafter. Global T&D players currently trade between 5x and 7x historical EV/EBITDA, which we believe should be a benchmark for the ZIV acquisition. CG currently trades at a PE of 13.8x and 10.2x on FY13E and FY14E, respectively. On an EV/EBIDTA basis, the stock trades at 7.7x and 6.0x on FY13E and FY14E, respectively. WE maintain ‘BUY/SO’ with TP of INR142.
The management is hosting a concall on Saturday, July 28, 2012 at 2:00pm.
Regards,
No comments:
Post a Comment