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BGR Energy Systems (BGRL)
Industrials
Weak operations and balance sheet deterioration continues. Revenues were weak
at Rs7.7 bn, down 32% yoy. EBITDA margin expanded by 200 bps yoy likely on higher
revenue contribution from BoP segment versus EPC. However, interest cost at Rs302
mn more than doubled yoy on higher debt levels (Rs23 bn), a rise of Rs7 bn from
FY2011-end levels on higher working capital levels (over 200 days). We revise our
estimates and retain REDUCE with a revised TP of Rs300 (Rs400 earlier).
Revenues disappoint on weak execution of EPC backlog; high interest costs further mar net PAT
Revenues down 32% yoy. BGR Energy reported a sharp revenue decline to Rs7.7 bn, down
32% yoy (22% below estimate) likely on slower-than-expected execution of large EPC orders.
Margin expansion of 260 bps yoy likely on higher contribution form BoP orders. Sharp
EBITDA margin expansion of 260 bps yoy to 14.3% (expectation of flat margins) was likely led
by favourable revenue mix between BoP and EPC orders (reflected in lower raw material costs).
Net PAT of Rs514 bn, down 34% yoy. Interest expense more than doubled yoy to Rs302 mn
in 2QFY12 and was up 68% on a sequential basis. Net PAT of Rs514 mn is down 34% yoy.
Order inflows of Rs5.3 bn in 2Q; NTPC bulk tender order likely in 2H. BGR Energy did not
win any major power segment (BoP and/or BTG) order in this quarter - reported inflow of
Rs5.27 bn in 2QFY11. This implies a 1HFY12-end order backlog of about Rs72-73 bn.
Balance sheet deteriorates on increased debt levels led by sharp rise in working capital levels
BGR Energy reported a gross debt of Rs21 bn at end-1HFY12, significantly (by about Rs7 bn)
higher than FY2011-end levels of Rs13 bn, primarily led by higher working capital requirement on
higher debtor days. Working capital deteriorated in 1HFY12 rising to over 200 days of sales (on
trailing four quarter revenues) versus 103 days at end-FY2011. We expect the company to end the
year with net working capital levels of about 160 days of sales.
Revise estimates and target price to Rs300/share; retain REDUCE
We revise our estimates to Rs35 and Rs28 from Rs40.4 and Rs39 for FY2012E and FY2013E on
lower order inflows (Rs20/89 bn in FY2012E/13E vs. Rs81/89 bn earlier) and higher debt and
interest cost. We correspondingly revise our TP to Rs300 (from Rs400) based on unchanged10X
FY2013E EPS. We have not yet built the execution of likely NTPC bulk tender orders in our
estimates. Retain REDUCE rating on (1) low revenue visibility, (2) potential disappointment on
near-term opportunities, and (3) macro issues plaguing the sector to delay much-needed inflows.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BGR Energy Systems (BGRL)
Industrials
Weak operations and balance sheet deterioration continues. Revenues were weak
at Rs7.7 bn, down 32% yoy. EBITDA margin expanded by 200 bps yoy likely on higher
revenue contribution from BoP segment versus EPC. However, interest cost at Rs302
mn more than doubled yoy on higher debt levels (Rs23 bn), a rise of Rs7 bn from
FY2011-end levels on higher working capital levels (over 200 days). We revise our
estimates and retain REDUCE with a revised TP of Rs300 (Rs400 earlier).
Revenues disappoint on weak execution of EPC backlog; high interest costs further mar net PAT
Revenues down 32% yoy. BGR Energy reported a sharp revenue decline to Rs7.7 bn, down
32% yoy (22% below estimate) likely on slower-than-expected execution of large EPC orders.
Margin expansion of 260 bps yoy likely on higher contribution form BoP orders. Sharp
EBITDA margin expansion of 260 bps yoy to 14.3% (expectation of flat margins) was likely led
by favourable revenue mix between BoP and EPC orders (reflected in lower raw material costs).
Net PAT of Rs514 bn, down 34% yoy. Interest expense more than doubled yoy to Rs302 mn
in 2QFY12 and was up 68% on a sequential basis. Net PAT of Rs514 mn is down 34% yoy.
Order inflows of Rs5.3 bn in 2Q; NTPC bulk tender order likely in 2H. BGR Energy did not
win any major power segment (BoP and/or BTG) order in this quarter - reported inflow of
Rs5.27 bn in 2QFY11. This implies a 1HFY12-end order backlog of about Rs72-73 bn.
Balance sheet deteriorates on increased debt levels led by sharp rise in working capital levels
BGR Energy reported a gross debt of Rs21 bn at end-1HFY12, significantly (by about Rs7 bn)
higher than FY2011-end levels of Rs13 bn, primarily led by higher working capital requirement on
higher debtor days. Working capital deteriorated in 1HFY12 rising to over 200 days of sales (on
trailing four quarter revenues) versus 103 days at end-FY2011. We expect the company to end the
year with net working capital levels of about 160 days of sales.
Revise estimates and target price to Rs300/share; retain REDUCE
We revise our estimates to Rs35 and Rs28 from Rs40.4 and Rs39 for FY2012E and FY2013E on
lower order inflows (Rs20/89 bn in FY2012E/13E vs. Rs81/89 bn earlier) and higher debt and
interest cost. We correspondingly revise our TP to Rs300 (from Rs400) based on unchanged10X
FY2013E EPS. We have not yet built the execution of likely NTPC bulk tender orders in our
estimates. Retain REDUCE rating on (1) low revenue visibility, (2) potential disappointment on
near-term opportunities, and (3) macro issues plaguing the sector to delay much-needed inflows.
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