Shriram EC – Confident to recover dues of Rs6.5 bn by Q2FY12 ::Emkay

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Shriram EC – Not Rated – Market Cap Rs6.4 bn – Confident to recover dues of Rs6.5 bn by Q2FY12, hence trigger meaningful upgrades to FY12E earnings

We met the management of Shriram EPC in Chennai. We met Managing Director & CEO Mr. T Shivaraman and CFO Mr. R Dharmarajan. The key takeaways from our discussion with the management are as under.

Takeaways on the Industry/Business

On Core EPC Business

n    Project finalization in the process industries and power remains weak at this juncture (2) Remains relatively confident on pick-up in order inflows especially from Steel industry, where it sees flow thru of projects from Sail, Vizag Steel and Tata Steel

n    Good pipeline of projects in municipal water and waste water, but finalizations remain slow

n    No pick-up in pipeline rehabilitation after Common Wealth games

Windmill Equipment Business

n    Believes that price drop in Windmill Equipment has been arrested, price drop from Rs63 Mn/MW to Rs58 Mn/MW

n    Players remain aggressive in new product launches with business shifting to produce tailor-made equipment, unlike one product fitting all customers

n    Consequently, R&D expenditures have increased dramatically

n    Slew of new launches in the market with introduction of 3 MW machines in the market

n    No pick-up in demand from US markets, owing to surplus in Gas availability

n    Expected pick-up in European market, owing to Germany decision to abandon 10000 MW of nuclear power plant translating into 25000 MW demand for Windmill equipment