BGR Energy Systems - 2QFY2013 Result Update - Angel Broking

BGR Energy (BGR) reported a dismal set of numbers for 2QFY2013, below our expectations. The company registered an 18.7% yoy decline in top-line to Rs.627cr. The increase in interest cost by 32.8% to Rs.40cr, due to working capital borrowings led to a decline in PAT by 32.4% yoy, which came at Rs.35cr, lower than our expectations.

Key highlights: The company reported an 18.7% yoy decline in top-line as the construction & EPC segment posted a decline by 16.4% yoy to Rs.568cr while the capital goods segment declined by 35.3% yoy to Rs.59cr. The combination of tepid order inflow due to capex slowdown and recently won orders having long gestation period has resulted in continuous decline in top-line for last few quarters. The operating margin expanded by 91bp yoy to 15.2% in spite of weak performance of capital goods segment at EBITA level due to 258bp yoy margin expansion of construction and EPC segment. During the quarter, the company has won the Notification of Award (NOA) from Damodar Valley Corporation for steam generators. The order is approximately valued at Rs.1,901cr. Order backlog at the end of 2QFY2013 stood at ~Rs.13,979cr up 92.3% yoy as NTPC bulk order is recognized in the order book.

Outlook and Valuation: BGR's working capital has seen deterioration over the past few quarters, mainly due to high receivables. In our view, tight liquidity is likely to transmit negatively on BGR's books. At the current market price, the stock is trading at a PE multiple of 9.6x on our FY2014E EPS estimates, which we believe is reasonable amidst the structural issues (slowdown of order inflow in BTG space and high leverage) faced by the company. Hence, we maintain our Neutral view on the stock.

Source : Equity Bulls

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