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Wins 2x300MW EPC Contract Worth Rs17bn
BGR Energy has won an EPC contract for setting up 2x300 MW coal-based
thermal power project from TRN Energy, New Delhi. The Rs16.98bn EPC
contract is inclusive of boilers and turbine generators (BTG) worth Rs8.4bn
and balance of plant (BoP) equipment worth Rs8.58bn. So far in FY12, BGR
Energy received order from Nuclear Power Corporation of India worth
Rs4.44bn and NTPC bulk tender II 4x800MW turbine generator order worth
~Rs29bn (yet to be awarded, expected in 3QFY12). Total order inflow in
FY12E will thereby rise to ~Rs50-51bn, in line with our assumption of
Rs50bn. We maintain our order inflow, revenue estimates and EPS guidance
for FY12/13 and retain our TP of Rs258 with a Sell rating.
Aggressive pricing stays: As the EPC/BTG orders on the horizon are drying up,
the trend of aggressive pricing to win contracts is intensifying. The BTG equipment
worth Rs8.4bn, to be procured from China Western Power Industrial Co, is priced
aggressively at Rs14mn/MW, 36% lower than Rs22mn/MW price quoted by Bharat
Heavy Electricals (BHEL) for similar rating sets. The BoP portion of the order worth
Rs8.58bn to be executed by BGR Energy is 28% lower than a similar 2x300 MW
Haldia Energy BoP project won by Punj Lloyd for Rs11.95bn in September 2011.
Project highlights: The 2x300MW thermal power project of TRN Energy is
located at Nawapara village in Chhattisgarh. The project has already received
forest/environmental clearance and land/water allocation. Coal linkage has been
tied up with South Eastern Coal Ltd. BGR Energy will execute the first unit in 29
months and the second unit in 32 months. The project value includes foreign
currency component of US$188mn at an exchange rate of Rs44.7 for the BTG to
be procured from China. The contract provides for foreign exchange variation
protection to BGR Energy.
Outlook: We remain negative on the future prospects of BGR Energy as the BTG
industry is heading towards tough times ahead. Lull in order placement expected
over FY11-13, over-supply because of increased installed capacity base of
domestic industry, Chinese/Korean players penetrating private power companies
and mounting pricing pressure leading to price under-cutting will worsen the
financial health of BGR Energy. We expect a sharp fall in consolidated RoE/RoCE
by 20%/14.5% to 19%/9.5%, respectively, in FY13E, higher D/E ratio of 2.4x in
FY13E and negative free cash flow of Rs28.4bn over FY11-13E. We maintain our
TP of Rs258, at 8xFY13E EPS of Rs32.3, and reiterate our Sell rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Wins 2x300MW EPC Contract Worth Rs17bn
BGR Energy has won an EPC contract for setting up 2x300 MW coal-based
thermal power project from TRN Energy, New Delhi. The Rs16.98bn EPC
contract is inclusive of boilers and turbine generators (BTG) worth Rs8.4bn
and balance of plant (BoP) equipment worth Rs8.58bn. So far in FY12, BGR
Energy received order from Nuclear Power Corporation of India worth
Rs4.44bn and NTPC bulk tender II 4x800MW turbine generator order worth
~Rs29bn (yet to be awarded, expected in 3QFY12). Total order inflow in
FY12E will thereby rise to ~Rs50-51bn, in line with our assumption of
Rs50bn. We maintain our order inflow, revenue estimates and EPS guidance
for FY12/13 and retain our TP of Rs258 with a Sell rating.
Aggressive pricing stays: As the EPC/BTG orders on the horizon are drying up,
the trend of aggressive pricing to win contracts is intensifying. The BTG equipment
worth Rs8.4bn, to be procured from China Western Power Industrial Co, is priced
aggressively at Rs14mn/MW, 36% lower than Rs22mn/MW price quoted by Bharat
Heavy Electricals (BHEL) for similar rating sets. The BoP portion of the order worth
Rs8.58bn to be executed by BGR Energy is 28% lower than a similar 2x300 MW
Haldia Energy BoP project won by Punj Lloyd for Rs11.95bn in September 2011.
Project highlights: The 2x300MW thermal power project of TRN Energy is
located at Nawapara village in Chhattisgarh. The project has already received
forest/environmental clearance and land/water allocation. Coal linkage has been
tied up with South Eastern Coal Ltd. BGR Energy will execute the first unit in 29
months and the second unit in 32 months. The project value includes foreign
currency component of US$188mn at an exchange rate of Rs44.7 for the BTG to
be procured from China. The contract provides for foreign exchange variation
protection to BGR Energy.
Outlook: We remain negative on the future prospects of BGR Energy as the BTG
industry is heading towards tough times ahead. Lull in order placement expected
over FY11-13, over-supply because of increased installed capacity base of
domestic industry, Chinese/Korean players penetrating private power companies
and mounting pricing pressure leading to price under-cutting will worsen the
financial health of BGR Energy. We expect a sharp fall in consolidated RoE/RoCE
by 20%/14.5% to 19%/9.5%, respectively, in FY13E, higher D/E ratio of 2.4x in
FY13E and negative free cash flow of Rs28.4bn over FY11-13E. We maintain our
TP of Rs258, at 8xFY13E EPS of Rs32.3, and reiterate our Sell rating.
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