BGR Energy Systems - EPS decline may continue on order and execution delays - Avendus

BGR Energy Systems (BGRL) has re-rated sharply after bagging INR87bn worth of BTG orders since Sep11. However, its BOP/EPC project order book continues to deplete over delays in new orders and stands at 1.7x TTM revenues. We forecast the execution of BTG orders to drive a CAGR of 14% in standalone revenue over FY13f-FY15f, but lead to fall in EBITDA margin from 13.7% in FY12 to 7.9% in FY15f.

We cut the FY14f standalone EPS by 33% and forecast a recovery in EPS growth in FY15 - though it is largely dependent on recovery in BOP/EPC orders. Sharp reduction in the discount to BHEL P/E prices-in higher growth prospects while ignoring margin risks.

We rollover the TP to Dec13 and raise it to INR230 based on the SOTP method. Maintain Reduce.

Source : Equity Bulls

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