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From TRIL, Mr. Satyen Mamtora, Joint MD and Mr. Sanjay Mazmudar, shared
their outlook on the company
Venturing into higher KV range - TRIL's management reaiffirmed its aggressive focus to
enter into higher KV class (400KV and above). Recent developments in this regard - (1) JV
with ZTR, Ukraine, (2) L1 bidder for supplying eight 765kv transformers to PGCIL (order
size:Rs1.2bn) along with ZTR, (3) on track to deliver 1,200kv soon and (4) delivery of 400kv
transformer to SEB - an important pre-qualification for PGCIL orders.
Management believes that TRIL's focus on (1) higher range of transformers (400kv, 765kv
& 1200kv) and (2) achieving prequalification for supply of higher range of transformers to
PGCIL/NTPC/SEBs will propel future growth. In these segments, it competes with Crompton
Greaves, ABB, Areva and Siemens
Margins might remain under pressure - Management indicated that margins pressure
will continue for a few more quarters (1) due to its low entry level bids in 400kv/765kv
transformers to gain foothold in the market and (2) competition. However, management is
confident of maintaining 11% margins in FY12E.
Volumes - Management guiding for a volume growth of about 30-40% in FY12E and
expects to reach 20,000MVA by FY13E.
Expects recovery in ordering from H2FY12 onwards
Our view - to benefit from likely strong demand growth ahead
Transformer sector has been hit by both supply side pricing pressures (increased
capacities) and demand growth moderation. We believe with 1) huge generation capacity
slated for commissioning in FY12-14E, 2) transmission and distribution still lagging behind
and 3) industrial capex picking up - demand growth is likely to pick up significantly starting
H2FY12. Consequently, we also believe that pricing downside from here is limited- signs
already visible with margins more or less stable since past 2-3 quarters. Given TRIL's 1)
capacity utilization at 62% and 2) capacity to deliver across ranges - company is best
placed to take advantage of likely strong demand growth ahead, especially in higher
ranges. We expect earnings CAGR of 22% in FY11-FY13E with earnings of Rs37.4 and Rs
46.1 for FY12E and FY13E respectively. At CMP of Rs218, TRIL is trading at 6.8x/5.5x FY12/
13E earnings, 0.9x/0.8x FY12/13E book value and 3.4x/2.9x FY12/13E EBITDA. Though, we
expect a slow recovery in terms of realizations (due to the still present overcapacity) we like
TRIL due to (1) its entry into big league and (2) valuation discount to peers.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
From TRIL, Mr. Satyen Mamtora, Joint MD and Mr. Sanjay Mazmudar, shared
their outlook on the company
Venturing into higher KV range - TRIL's management reaiffirmed its aggressive focus to
enter into higher KV class (400KV and above). Recent developments in this regard - (1) JV
with ZTR, Ukraine, (2) L1 bidder for supplying eight 765kv transformers to PGCIL (order
size:Rs1.2bn) along with ZTR, (3) on track to deliver 1,200kv soon and (4) delivery of 400kv
transformer to SEB - an important pre-qualification for PGCIL orders.
Management believes that TRIL's focus on (1) higher range of transformers (400kv, 765kv
& 1200kv) and (2) achieving prequalification for supply of higher range of transformers to
PGCIL/NTPC/SEBs will propel future growth. In these segments, it competes with Crompton
Greaves, ABB, Areva and Siemens
Margins might remain under pressure - Management indicated that margins pressure
will continue for a few more quarters (1) due to its low entry level bids in 400kv/765kv
transformers to gain foothold in the market and (2) competition. However, management is
confident of maintaining 11% margins in FY12E.
Volumes - Management guiding for a volume growth of about 30-40% in FY12E and
expects to reach 20,000MVA by FY13E.
Expects recovery in ordering from H2FY12 onwards
Our view - to benefit from likely strong demand growth ahead
Transformer sector has been hit by both supply side pricing pressures (increased
capacities) and demand growth moderation. We believe with 1) huge generation capacity
slated for commissioning in FY12-14E, 2) transmission and distribution still lagging behind
and 3) industrial capex picking up - demand growth is likely to pick up significantly starting
H2FY12. Consequently, we also believe that pricing downside from here is limited- signs
already visible with margins more or less stable since past 2-3 quarters. Given TRIL's 1)
capacity utilization at 62% and 2) capacity to deliver across ranges - company is best
placed to take advantage of likely strong demand growth ahead, especially in higher
ranges. We expect earnings CAGR of 22% in FY11-FY13E with earnings of Rs37.4 and Rs
46.1 for FY12E and FY13E respectively. At CMP of Rs218, TRIL is trading at 6.8x/5.5x FY12/
13E earnings, 0.9x/0.8x FY12/13E book value and 3.4x/2.9x FY12/13E EBITDA. Though, we
expect a slow recovery in terms of realizations (due to the still present overcapacity) we like
TRIL due to (1) its entry into big league and (2) valuation discount to peers.
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