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Research
BGR Energy Systems - 1QFY2013 Result Update - Motilal Oswal
Posted On : 2012-08-08 19:53:11( TIMEZONE : IST )
Mixed performance in 1QFY13: BGR Energy (BGRL) reported mixed performance for 1QFY13. Revenue declined 17% YoY to INR6.1b, significantly below our estimate. Net profit declined 33% YoY to INR335m, in line with our estimate, driven by 150bp YoY EBITDA margin expansion to 14.4% v/s our estimate of 13.1%.
- Management cuts revenue guidance: Revenue was lower because, of the four projects under execution, two are in the initial stages. Though both these projects are likely to pick up in the remaining part of the year, the management has cut its revenue guidance for FY13 to INR37-38b from INR47b earlier due to delayed order inflows from NTPC projects, etc.
- Favorable product mix supports EBITDA margin: EBITDA margin improved on account of favorable mix, driven by higher contribution from BOP contracts (at 65%) relative to EPC contracts. Currently, EPC contracts constitute ~70% of the total order book, and going forward, a large part of the incremental orders are likely to be through the EPC route, impacting margins. The management expects EBITDA margin to stabilize at 11-12% in FY13/14.
- Excluding NTPC project awards, order inflow remains muted: Order book as at the end of June 2012 stood at INR150b, of which INR7b are product orders and INR143b are projects. Projects include NTPC bulk tenders of INR86b (57% of total order book), INR22b of EPC and INR30b of BOP, indicating no major order inflow other than booking of NTPC projects. The management indicated that bidding pipeline stands at ~11GW for FY13.
- Working capital remains at elevated level: Net working capital at INR17b remains at elevated level, though slightly down from INR19b on QoQ basis. Retention money is at INR14, of which INR10b is against various projects under construction and the remaining INR4b is against three major projects that have already been completed. The management expects realization of the same by the end of FY13.
- Cutting estimates; maintain Neutral: We have cut our FY13 estimates by 11%, given deteriorating order inflow. We believe that the Indian power equipment market is going through a tough phase, with slowing demand and rising costs. Maintain Neutral rating on the stock, with a revised target price of INR253 (10x FY14E earnings).
