Buy BGR Energy Systems - Motilal Oswal

BGR Energy (BGRL IN; Mkt Cap USD1.1b, CMP Rs692, Buy)

In meetings with investors at a road-show in Mumbai, hosted by Motilal Oswal Securities, BGR Energy reiterated its strong growth outlook over FY11-13.

BGR is technically qualified for two super-critical projects of the Rajasthan Electricity Board, each with 2x 660MW configuration, and an order value of Rs65b. BGR expects to win at least one of them. BGR is executing a 600MW power project in the state and has bid for the boiler package of NTPC bulk tender (11x 660MW). We expect BGR's order-book to double to Rs200b, by the end of FY11 from Rs105b at the end of 2QFY11.

BGR recently formed two JVs with Hitachi to make BTG for power plants and will invest Rs44b to build power units with over 4,000MW capacity. In a turbine-generator (TG) JV, named BGR Turbines Company (P) Ltd, The JV's debt/equity structure is 70:30 and BGR's equity commitment is Rs9.5b, which it expects to meet internally.

We expect strong 45% revenue CAGR over FY10-12, driven mainly by the two projects. We expect BGR to post earnings of 37% CAGR over FY10-12. The stock trades at 13x FY12E earnings. We maintain a Buy recommendation on the stock, with a target price of Rs958, based on 18x FY12E earnings. We have not factored-in value of the JVs.

Source : Equity Bulls

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