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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf
Capital Goods
ƒ Windy ordering environment
Unabated macro headwinds continued to take their toll on order inflows,
especially on the power generation front. During Q4FY12, companies
under our coverage, announced order inflows totalling |14,227 crore,
primarily led by L&T (|12412 crore). From a segmental perspective,
power generation has been a laggard while T&D and infra orders have
been robust, backed by strong ordering from PGCIL and NHAI. PGCIL
has maintained a strong ordering trend. Orders from PGCIL in AprilFebruary, 2012 amounted to | 15,940 crore, up 10% YoY while in
January-February, 2012 they amounted to | 4705 crore, up 60% YoY.
On the generation front, although private sector capex remained muted,
NTPC awarded new boiler orders totalling 7260 MW.
ƒ Revenue growth to remain flattish
Bleak ordering in the last few quarters, combined with client side delays
in execution will be reflected in flattish revenue growth in Q4FY12E (up
4% YoY, excluding: L&T). Including L&T, the figure jumps to 19%,
backed by a 26% expected increase in L&T’s revenues. Companies
exposed to power generation, like BGR and Thermax, would be most
affected with revenue decline expectation of 21% YoY and 6% YoY,
respectively. However, T&D companies are expected to post robust
revenue growth. T&D companies like KEC and KPT are expected to post
22% and 19% YoY revenue growth, respectively. We believe L&T would
be able to meet its full year revenue guidance of 25% though we have
factored in a 23% revenue growth.
ƒ Interest burden: more than what they can carry!
EBITDA margins are expected to remain muted and decline by 168 bps
YoY to 11.6%, on the back of increasing raw material costs. A
deteriorating working capital cycle pan-industry has increased the loan
fund requirement, thereby pushing up the interest burden. Interest cost
for companies like Jyoti Structures, KEC and KPT are expected to swell
by 27%, 34%, and 94% YoY, respectively, thereby impacting the
bottomline. PAT for companies like BGR and Thermax are expected to
witness de-growth, given tepid order flows and muted execution.
Sterlite Technologies is expected to report better profitability on the
back of depleting low margin orders. L&T is expected to deliver heal
Company specific view
Company Remarks
BGR Energy Feeble execution trend would persist in Q4FY12E owing to tepid order inflows in the
past quarters. We expect revenues to decline ~21% YoY to | 1156 crore. However,
higher share of BoP revenues will cushion margins to 11.7%, up by 50 bps YoY. PAT
is expected to de-grow by a significant 36% YoY to |60 crore, owing to high interest
burden
Hindustan Dorr We expect revenues to climb 10% YoY to |214 crore for Q4FY12E, though on a full
year basis it would decline 26% YoY. EBITDA margins are expected at ~9.5%.
Interest costs are expected to balloon up by 67% YoY owing to stretched working
capital and higher rates. PAT is expected at | 5.7 crore
Thermax A persistently declining order book and book to bill ratio, coupled with no major
order win in Q4FY12 has aggravated the revenue visibility concern. Revenues are
expected to decline 4% YoY. EBITDA margins are expected to decline 40 bps to
9.3%. PAT is expected at |112 crore, down 12% YoY
Jyoti Structures On the back of a reasonable order backlog, we expect a revenue growth of ~31%
QoQ and 7% YoY. EBITDA margins are expected to remain steady at 11.0%. Bulging
GWC will push interest outgo by 27% YoY to | 42 crore. Consequently, PAT is
expected to decline 24% YoY to |26.7 crore
Sterlite
Technologies
We expect revenues to grow 23% YoY on back of robust execution. EBITDA
margins are expected to improve 70 bps to 7.9% as low margin orders in the power
segment get depleted. High interest costs, up 43% YoY, will keep PAT under
pressure at | 15.0 crore
KEC International Given the bulging order backlog, and new order wins worth | 1624 crore in Q4FY12,
we expect topline to grow 22% YoY to | 1901 crore. However, EBITDA margins are
expected to remain under pressure at 8.4% on the back of high international fixed
price orders. PAT is expected to decline by 14.5% YoY to | 67 crore
Kalpataru Power
Transmission
Given an average TTM backlog of |5,725 crore, we expect the topline to grow 32%
QoQ and 19% YoY. EBITDA margins are expected to be at 11.30%, up 30 bps YoY.
However, with 94% YoY rise in interest cost burden we expect PAT margins to trim
to 6%, pushed down from 6.8% in Q4FY11
Larsen & Toubro L&T announced order wins totalling | 12412 crore in Q4FY12. On the back of strong
execution, we expect the topline to grow 26% YoY, to | 19359 crore. EBITDA
margins are expected to be at 12.3%. PAT is expected at | 1734 crore, up 19% YoY
Source: Company, ICICIdirect.com Research
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