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BGR ENERGY SYSTEMS
RECOMMENDATION: BUY
TARGET PRICE: RS.703
FY12E P/E: 9.1X
q Revenue of the company for Q3FY11 grew by 97% YoY led by strong execution
from EPC projects as well as robust order book. Revenue growth
was ahead of our estimates.
q Operating margins for Q3FY11 stood at 11.3% vis-à-vis 11.2% in Q3FY10.
Operating margins are inline with our estimates.
q Net profit growth for Q3FY11 stood at 109% YoY led by excellent revenue
growth.
q Based on lower than expected order inflow seen in FY11 till date, we
fine tune our FY12 estimates and expect revenues to grow at a CAGR of
37% and net profits to grow at a CAGR of 34% between FY10-FY12.
q BGR is currently trading at 10.8x and 9.1x P/E on FY11 and FY12 estimates
respectively. Due to shortfall in the order inflow estimates, we reduce
our P/E multiple to 14x as against 16x earlier on one year forward estimated
earnings for valuing the company. We arrive at a revised price target
of Rs 703 (Rs 836 earlier). We continue to maintain our positive bias
for the company and maintain BUY on the stock.
Revenue growth led by ramping up of execution on key projects
n Revenue of the company for Q3FY11 grew by 97% YoY led by strong execution
from EPC projects as well as robust order book. Revenue growth was ahead of
our estimates.
n Order book of the company currently stands at Rs 93 bn and provides revenue
visibility for next 1.5-2 years.
n However, order inflow for the company has been much below our expectations.
BGR was expecting order inflow from RRUVNL for 2X660MW EPC projects in
Suratgarh and Chabbra. BHEL has emerged as lowest bidder for both these
projects. But in these projects, client has a right to award one of the projects to
BGR if it matches the bid quoted by BHEL. However, no decision has yet been
taken on this project, company expects decision to be announced by end of this
month.
n Along with this, BGR had also submitted bids for NTPC bulk tender for super critical
boilers - at Mauda (2X660MW), Solapur (2X660MW), Nabinagar
(3X660MW), Meja (2X660MW) and Raghunathpur (2X660MW). However the
project has been delayed due to litigation case filed by one of the bidders. Court
hearing for this case is now expected by 18th Feb, 2011 and then NTPC will
decide about the date of award of project.
n Regarding order inflow from other projects going forward, company has placed
bids with GIPCL (order size worth Rs 20bn), Uran, Maharashtra (Rs 25 bn),
Bellary, Karnataka (Rs 33 bn), Wanakbori, Gujarat (Rs 40bn), Ennore, TN (Rs 25-
30bn) and several IPP projects worth Rs 50-60 bn. So going ahead, company
expects order inflow to improve significantly.
n Power segment continued to form a significant proportion of the order book as
well as revenues. Power segment revenues for Q3FY11 stood at Rs 11.87 bn, diversified
across Kothagudem BOP(Rs 360 mn), Kaperkheda BOP(Rs 340 mn),
Mettur EPC(Rs 5000 mn), Kalisindh EPC(Rs 4830 mn), Chandrapur BOP (Rs 780
mn ) and Marwa BOP (Rs 350 mn). Remaining revenues are being contributed by
other divisions.
n Due to delays seen in award of projects during FY11, we tweak our revenue
estimates for FY12.
n Post revising our order inflow estimates, we expect revenues to grow at a CAGR
of 37% between FY10-FY12.
Operating margins inline with our estimates
n Operating margins for Q3FY11 stood at 11.3% vis-à-vis 11.2% in Q3FY10. Operating
margins are inline with our estimates.
n We continue to expect margins to remain in the range of 11% going forward.
Net profit growth led by strong revenues
n Net profit growth for Q3FY11 stood at 109% YoY led by excellent revenue
growth.
n Post fine tuning our estimates, we expect net profits to grow at a CAGR of 34%
between FY10-FY12.
Valuation and recommendation
n BGR is currently trading at 10.8x and 9.1x P/E on FY11 and FY12 estimates respectively.
n Due to shortfall in the order inflow estimates, we reduce our P/E multiple to 14x
as against 16x earlier on one year forward estimated earnings for valuing the
company.
n We believe that order inflow would ramp up in FY12 with strong bid pipeline for
the company from state electricity projects as well as from independent power
producers.
n We arrive at a revised price target of Rs 703 (Rs 836 earlier). We continue to
maintain our positive bias for the company and maintain BUY on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BGR ENERGY SYSTEMS
RECOMMENDATION: BUY
TARGET PRICE: RS.703
FY12E P/E: 9.1X
q Revenue of the company for Q3FY11 grew by 97% YoY led by strong execution
from EPC projects as well as robust order book. Revenue growth
was ahead of our estimates.
q Operating margins for Q3FY11 stood at 11.3% vis-à-vis 11.2% in Q3FY10.
Operating margins are inline with our estimates.
q Net profit growth for Q3FY11 stood at 109% YoY led by excellent revenue
growth.
q Based on lower than expected order inflow seen in FY11 till date, we
fine tune our FY12 estimates and expect revenues to grow at a CAGR of
37% and net profits to grow at a CAGR of 34% between FY10-FY12.
q BGR is currently trading at 10.8x and 9.1x P/E on FY11 and FY12 estimates
respectively. Due to shortfall in the order inflow estimates, we reduce
our P/E multiple to 14x as against 16x earlier on one year forward estimated
earnings for valuing the company. We arrive at a revised price target
of Rs 703 (Rs 836 earlier). We continue to maintain our positive bias
for the company and maintain BUY on the stock.
Revenue growth led by ramping up of execution on key projects
n Revenue of the company for Q3FY11 grew by 97% YoY led by strong execution
from EPC projects as well as robust order book. Revenue growth was ahead of
our estimates.
n Order book of the company currently stands at Rs 93 bn and provides revenue
visibility for next 1.5-2 years.
n However, order inflow for the company has been much below our expectations.
BGR was expecting order inflow from RRUVNL for 2X660MW EPC projects in
Suratgarh and Chabbra. BHEL has emerged as lowest bidder for both these
projects. But in these projects, client has a right to award one of the projects to
BGR if it matches the bid quoted by BHEL. However, no decision has yet been
taken on this project, company expects decision to be announced by end of this
month.
n Along with this, BGR had also submitted bids for NTPC bulk tender for super critical
boilers - at Mauda (2X660MW), Solapur (2X660MW), Nabinagar
(3X660MW), Meja (2X660MW) and Raghunathpur (2X660MW). However the
project has been delayed due to litigation case filed by one of the bidders. Court
hearing for this case is now expected by 18th Feb, 2011 and then NTPC will
decide about the date of award of project.
n Regarding order inflow from other projects going forward, company has placed
bids with GIPCL (order size worth Rs 20bn), Uran, Maharashtra (Rs 25 bn),
Bellary, Karnataka (Rs 33 bn), Wanakbori, Gujarat (Rs 40bn), Ennore, TN (Rs 25-
30bn) and several IPP projects worth Rs 50-60 bn. So going ahead, company
expects order inflow to improve significantly.
n Power segment continued to form a significant proportion of the order book as
well as revenues. Power segment revenues for Q3FY11 stood at Rs 11.87 bn, diversified
across Kothagudem BOP(Rs 360 mn), Kaperkheda BOP(Rs 340 mn),
Mettur EPC(Rs 5000 mn), Kalisindh EPC(Rs 4830 mn), Chandrapur BOP (Rs 780
mn ) and Marwa BOP (Rs 350 mn). Remaining revenues are being contributed by
other divisions.
n Due to delays seen in award of projects during FY11, we tweak our revenue
estimates for FY12.
n Post revising our order inflow estimates, we expect revenues to grow at a CAGR
of 37% between FY10-FY12.
Operating margins inline with our estimates
n Operating margins for Q3FY11 stood at 11.3% vis-à-vis 11.2% in Q3FY10. Operating
margins are inline with our estimates.
n We continue to expect margins to remain in the range of 11% going forward.
Net profit growth led by strong revenues
n Net profit growth for Q3FY11 stood at 109% YoY led by excellent revenue
growth.
n Post fine tuning our estimates, we expect net profits to grow at a CAGR of 34%
between FY10-FY12.
Valuation and recommendation
n BGR is currently trading at 10.8x and 9.1x P/E on FY11 and FY12 estimates respectively.
n Due to shortfall in the order inflow estimates, we reduce our P/E multiple to 14x
as against 16x earlier on one year forward estimated earnings for valuing the
company.
n We believe that order inflow would ramp up in FY12 with strong bid pipeline for
the company from state electricity projects as well as from independent power
producers.
n We arrive at a revised price target of Rs 703 (Rs 836 earlier). We continue to
maintain our positive bias for the company and maintain BUY on the stock.
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