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Capital Goods
Macro variables continue to play spoilsport
Deferral in capex decisions by corporates (mainly on the industrial
side), regulatory hurdles being faced by various projects and rise in
borrowing costs (impacts incremental IRR for fresh capex) still
continue to haunt the capital goods sector. Power linked capex
companies had a relatively better Q1FY12 in terms of order inflows.
T&D EPC companies witnessed better order inflow mainly from
SEBs, private players and international companies (KEC won orders
worth | 1625 crore, Kalpataru: | 1350 crore and Jyoti: | 524 crore in
Q1FY12E).
Full impact of input costs & interest rates to reflect on EBITDA and
PAT margins.
Our coverage companies will witness the full impact of rising input
costs in Q1FY12E. We expect our coverage companies to report
consolidated EBITDA margins of 12.9%, implying a decline of 70
bps YoY and 680 bps QoQ (Q1 is seasonally the weakest quarter).
Bhel (14.3% due to better execution and operational efficiency) and
Jyoti Structures (11.2% due to high domestic order backlog with
Price Variable Clause) are expected to have a marginal decline in
margins. Sterlite Technology, on the other had, will see a sharp
erosion of 860 bps YoY in margins owing to execution of low
margin power orders. On the other hand, results in Q1FY12 will also
fully reflect the impact of rising interest costs, which will dent PAT
margins as companies in the sector are highly working capital
sensitive. We estimate PAT margins will decline by 80 bps in
Q1FY12E for our coverage companies
Companies with robust order inflows in FY11 better secured in
FY12
Given the robust order backlog, robust execution and relatively
better order inflows, we expect Bhel and transmission EPC
companies to post better Q1FY12E results (revenue and PAT
growth). We expect Bhel and Thermax to post 23.4% YoY and 33%
YoY jump in revenues, respectively. In the T&D space, we expect
Jyoti to post 16% YoY revenue growth coupled with traction in
order inflows in Q1FY12E. We expect KEC International to have
robust order inflow growth coupled with 17% YoY and 19% jump in
revenues and PAT, respectively.
Company specific view
Company Remarks
Bhel We expect the company to clock robust revenue growth of 23.9% YoY, on the back
of the | 1,64,000 crore order backlog as of Q4FY11. Order inflows have been
reasonable during Q1FY12. The EBITDA is expected to decline YoY by 40 bps at
14.3%. We have built in PAT growth of ~18% YoY for Q1FY12E
BGR Energy Muted order inflows witnessed in FY11 will take a toll on growth rates of the
company as we expect BGR to report a 20% YoY decline in revenue growth. We
have built in EBITDA margin of 11.2% after taking into account the rising input
costs. We expect PAT to decline 33% YoY
Thermax The topline is expected to grow by 33% YoY in Q1FY12E. The order inflow during
Q1FY12 was reasonable given the | 400 crore order win. High input costs will lead
EBITDA to decline by 90 bps in Q1FY12E. Hence, PAT is expected to grow ~20%
YoY
Hindustan Dorr Sluggish order inflows will lead to tepid execution. Hence, we estimate revenues
will decline 19% YoY. We have also built in a 50 bps decline in EBITDA margins to
10.7% in Q1FY12E. We expect PAT to decline ~42% YoY in Q1FY12E
Sterlite
Technologies
We expect the company to report a 17% YoY jump in revenues. EBITDA margins
are expected to decline 860 bps YoY to 8.3% in Q1FY12E, on the back of execution
of low margin orders in the power segment. Consequently, PAT is expected to degrow
by 66% YoY in Q1FY12
Jyoti Structures The company has been witnessing traction in order inflows in Q4FY11 and
Q1FY12E, which we believe will lead to 16% YoY growth in revenues. Exposure to
domestic markets will ensure stable margins at 11.2%. We have built in flattish PAT
growth on account of a rise in borrowing costs
Kalpataru Power We expect standalone revenues to grow by 14.7%. Order inflows for the company
in Q1FY12E have been reasonable. On the margins front, we expect EBITDA
margins to be at 11.6%. PAT is expected to decline marginally by 2% YoY on the
back of a rise in interest costs
KEC
International
We expect consolidated revenues to rise by 17% YoY. The company has won
significant orders in Q1FY12E from domestic as well as international markets,
rendering high visibility. EBITDA margins are expected at 9.9% on the back of high
international fixed price orders. PAT is expected to grow by 19% YoY.
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Capital Goods
Macro variables continue to play spoilsport
Deferral in capex decisions by corporates (mainly on the industrial
side), regulatory hurdles being faced by various projects and rise in
borrowing costs (impacts incremental IRR for fresh capex) still
continue to haunt the capital goods sector. Power linked capex
companies had a relatively better Q1FY12 in terms of order inflows.
T&D EPC companies witnessed better order inflow mainly from
SEBs, private players and international companies (KEC won orders
worth | 1625 crore, Kalpataru: | 1350 crore and Jyoti: | 524 crore in
Q1FY12E).
Full impact of input costs & interest rates to reflect on EBITDA and
PAT margins.
Our coverage companies will witness the full impact of rising input
costs in Q1FY12E. We expect our coverage companies to report
consolidated EBITDA margins of 12.9%, implying a decline of 70
bps YoY and 680 bps QoQ (Q1 is seasonally the weakest quarter).
Bhel (14.3% due to better execution and operational efficiency) and
Jyoti Structures (11.2% due to high domestic order backlog with
Price Variable Clause) are expected to have a marginal decline in
margins. Sterlite Technology, on the other had, will see a sharp
erosion of 860 bps YoY in margins owing to execution of low
margin power orders. On the other hand, results in Q1FY12 will also
fully reflect the impact of rising interest costs, which will dent PAT
margins as companies in the sector are highly working capital
sensitive. We estimate PAT margins will decline by 80 bps in
Q1FY12E for our coverage companies
Companies with robust order inflows in FY11 better secured in
FY12
Given the robust order backlog, robust execution and relatively
better order inflows, we expect Bhel and transmission EPC
companies to post better Q1FY12E results (revenue and PAT
growth). We expect Bhel and Thermax to post 23.4% YoY and 33%
YoY jump in revenues, respectively. In the T&D space, we expect
Jyoti to post 16% YoY revenue growth coupled with traction in
order inflows in Q1FY12E. We expect KEC International to have
robust order inflow growth coupled with 17% YoY and 19% jump in
revenues and PAT, respectively.
Company specific view
Company Remarks
Bhel We expect the company to clock robust revenue growth of 23.9% YoY, on the back
of the | 1,64,000 crore order backlog as of Q4FY11. Order inflows have been
reasonable during Q1FY12. The EBITDA is expected to decline YoY by 40 bps at
14.3%. We have built in PAT growth of ~18% YoY for Q1FY12E
BGR Energy Muted order inflows witnessed in FY11 will take a toll on growth rates of the
company as we expect BGR to report a 20% YoY decline in revenue growth. We
have built in EBITDA margin of 11.2% after taking into account the rising input
costs. We expect PAT to decline 33% YoY
Thermax The topline is expected to grow by 33% YoY in Q1FY12E. The order inflow during
Q1FY12 was reasonable given the | 400 crore order win. High input costs will lead
EBITDA to decline by 90 bps in Q1FY12E. Hence, PAT is expected to grow ~20%
YoY
Hindustan Dorr Sluggish order inflows will lead to tepid execution. Hence, we estimate revenues
will decline 19% YoY. We have also built in a 50 bps decline in EBITDA margins to
10.7% in Q1FY12E. We expect PAT to decline ~42% YoY in Q1FY12E
Sterlite
Technologies
We expect the company to report a 17% YoY jump in revenues. EBITDA margins
are expected to decline 860 bps YoY to 8.3% in Q1FY12E, on the back of execution
of low margin orders in the power segment. Consequently, PAT is expected to degrow
by 66% YoY in Q1FY12
Jyoti Structures The company has been witnessing traction in order inflows in Q4FY11 and
Q1FY12E, which we believe will lead to 16% YoY growth in revenues. Exposure to
domestic markets will ensure stable margins at 11.2%. We have built in flattish PAT
growth on account of a rise in borrowing costs
Kalpataru Power We expect standalone revenues to grow by 14.7%. Order inflows for the company
in Q1FY12E have been reasonable. On the margins front, we expect EBITDA
margins to be at 11.6%. PAT is expected to decline marginally by 2% YoY on the
back of a rise in interest costs
KEC
International
We expect consolidated revenues to rise by 17% YoY. The company has won
significant orders in Q1FY12E from domestic as well as international markets,
rendering high visibility. EBITDA margins are expected at 9.9% on the back of high
international fixed price orders. PAT is expected to grow by 19% YoY.
Source: Company, ICICIdirect.com Research
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