Capital Goods Sector | Q3FY15E Results Preview (Kalpataru Power Transmission, Alstom T&D India, BGR Energy Systems, BHEL, Crompton Greaves, Greaves Cotton, Voltas, Siemens & ABB India) :: IndiaNivesh

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Post 2014 General Election, new government has made several policy initiatives/
announcements to debottleneck the stuck infrastructure/power projects and bring
new investments in the sector; these measures have resulted in sentiment
improvement across sector. However, its impact is yet to reach the ground level in
terms of new tendering activity/order finalization.
Operational performance of capital goods companies for Q3FY15E is expected to
remain muted as the pace of project execution has failed to show any sign of pickup.
Pace of order inflows also remain moderate and utilization of existing assets remain
at a lower level.
For the stocks under our coverage universe Q3FY15E is likely to remain mix quarter.
Power T&D companies like Alstom T&D, Crompton Greaves and Kalpataru Power
are likely to report top-line growth in the range of 11.7% to 14.2%. Whereas
diversified players like Siemens and ABB may show flat financial numbers for the
quarter. On account of constrained order book and execution delays, Power
generation players like BHEL and BGR Systems may show top-line decline of 13.6%
and 20% respectively. Performance of non-power capital goods companies is also
likely to remain muted with Greaves Cotton and Voltas showing top-line growth of
2.3% and (negative) 6.9% respectively.
Update:
 In continuation to the better execution shown in Q1 and Q2 of FY15, we expect
Kalpataru power to report 13% growth in the top-line to Rs 11.9 bn in Q3FY15E.
 Gradual completion of low margin and loss making infra orders should help
the company in improving its EBITDA margin. For Q3FY15E, we expect EBITDA
margin to expand by 65 bps to 9.6%
 In-line with EBITDA growth, we expect Net profit jump of 32.1% to Rs 445 mn
Key things to watch out:
 Orders in pipeline
 Updates on infra projects completion
Valuation:
We have buy rating on Kalpataru Power Transmission with target price of Rs 332,
valuing the company on SOTP basis

LINK
http://www.indianivesh.in/Admin/Upload/635567371217343750_Nivesh_Q3FY15%20Results%20Preview_CapitalGoods.pdf