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Power Utilities and Capital Goods (Pankaj Sharma)
Budget 2011 impact
Overall thrust on infrastructure continues. However, there are no new schemes
to promote further growth in the sector.
Key positives:
Parallel Excise Duty exemption for domestic suppliers producing capital
goods needed for expansion of existing mega or ultra mega power projects.
Allocation of Rs27.35bn for R&D in atomic energy and Rs10.47bn for
industrial sector projects
Allocation of Rs10.25bn for investment in Nuclear Power Corporation of
India Ltd (NPCIL)
Allocation of Rs60bn for Rajiv Gandhi Grameen Vidyutikaran Yojana
(RGGVY)
Allocation of Rs20.34bn for Restructured Accelerated Power Development
and Reforms Programme (R-APDRP)
Allocation of Rs8.13bn development of Hydro Power (National Hydro
Electric Power Corporation Ltd)
Key negatives:
No specific road-map, new schemes to increase capacity addition in
generation.
No announcement on distribution sector reforms.
No new announcement on relief measures for domestic capital goods
manufacturers to protect them from competition from imported goods.
Stock impact:
No major budget related impact except for BHEL. The proposal to reduce
duty on equipments used in large power projects is positive
We believe that the current pricing differential is about 30% between BHEL
and Chinese equipments; this should come down for large projects to about
22-25% that makes BHEL relatively more competitive vs. pre budget
scenario.Sector view: Power Utilities (Positive in the medium to
long term) and Capital Goods (Negative in the near
term)
We believe the growth opportunity is most significant in the power sector. The
core fundamentals for the sector are intact: a) considerable demand-supply gap
in the country; b) competitive cost of generation and fuel cost pass through for
significant portion of capacity.
However, there may not be any immediate impact on earnings for power
companies and equipment suppliers. We also believe companies that can
leverage a broad range of opportunities and have strong project management,
risk management, and execution skills will be the key beneficiaries.
Top picks
Our top Buys in the sector are Lanco, Reliance Infra, Power Grid and BHEL.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Power Utilities and Capital Goods (Pankaj Sharma)
Budget 2011 impact
Overall thrust on infrastructure continues. However, there are no new schemes
to promote further growth in the sector.
Key positives:
Parallel Excise Duty exemption for domestic suppliers producing capital
goods needed for expansion of existing mega or ultra mega power projects.
Allocation of Rs27.35bn for R&D in atomic energy and Rs10.47bn for
industrial sector projects
Allocation of Rs10.25bn for investment in Nuclear Power Corporation of
India Ltd (NPCIL)
Allocation of Rs60bn for Rajiv Gandhi Grameen Vidyutikaran Yojana
(RGGVY)
Allocation of Rs20.34bn for Restructured Accelerated Power Development
and Reforms Programme (R-APDRP)
Allocation of Rs8.13bn development of Hydro Power (National Hydro
Electric Power Corporation Ltd)
Key negatives:
No specific road-map, new schemes to increase capacity addition in
generation.
No announcement on distribution sector reforms.
No new announcement on relief measures for domestic capital goods
manufacturers to protect them from competition from imported goods.
Stock impact:
No major budget related impact except for BHEL. The proposal to reduce
duty on equipments used in large power projects is positive
We believe that the current pricing differential is about 30% between BHEL
and Chinese equipments; this should come down for large projects to about
22-25% that makes BHEL relatively more competitive vs. pre budget
scenario.Sector view: Power Utilities (Positive in the medium to
long term) and Capital Goods (Negative in the near
term)
We believe the growth opportunity is most significant in the power sector. The
core fundamentals for the sector are intact: a) considerable demand-supply gap
in the country; b) competitive cost of generation and fuel cost pass through for
significant portion of capacity.
However, there may not be any immediate impact on earnings for power
companies and equipment suppliers. We also believe companies that can
leverage a broad range of opportunities and have strong project management,
risk management, and execution skills will be the key beneficiaries.
Top picks
Our top Buys in the sector are Lanco, Reliance Infra, Power Grid and BHEL.
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