BGR Energy-A one-two punch-China Glut in BTG Segment, Shortage of thermal coal
With coal shortages leading to rationing of power supply in many areas, and the PRC crackdown on polluting Thermal Power plants as much as 50 Gigawatt of power gen equipment facilities with Shanghai Electric and Dong Fang is now available. This excess capacity has caused a massive glut in Asia, making marginal players like BGR vulnerable to price competition from Chinese supplies. Downgrade the stock.
Cautious; downgrade
With large debt the company is expected to take on for its BTG venture, the balance sheet is expected to be under severe stress. Desperation to bag contracts in order to service the debt and cover the large fixed cost, we expect the company to bid at aggressive levels to bag contracts, which in turn could affect earnings quality. The stock has seen significant de-rating over the past few quarters tumbling from
13.8x PE to 9.9x currently. Further downside cannot be ruled out, and BGR may quote at low single digit PE multiple going forth.
Excess supply in the Boiler, Turbine, Generating Segment
BGR Energy (BGR) currently is capable of meeting ~50% BOP requirement of a power plant. Baring small BOP/ EPC projects from private players, the company has essentially bagged and worked on projects from several SEBs. In July 2008, BGR bagged two large EPC orders from SEBs which marked the company's entry into EPC contracts, an important milestone for the company. However, we believe with competitive intensity increasing, growth for new players like BGR could get tough.
BTG venture with Hitachi – Entering an overcrowded market
In April 2010, BGR and Hitachi agreed to set up two JVs to manufacture super critical boilers and turbine-generators (TG) with Hitachi Germany and Hitachi Japan, respectively, with capacity of 4,000 MW each. Domestic manufacturing being a prerequisite for bagging NTPC bulk tenders, induced several players to set up domestic manufacturing capacities for boiler / turbine generators. However, we believe, BGR is entering an already crowded market which is likely to see over 50% over capacity.
New orders to act as key trigger, value driver
Qualifying for NTPC bulk tenders has been an important milestone for BGR. Given the lull in order inflows for the company, new orders will be key trigger for the stock going forward. The company could face stiff competition in the EPC space with many new entities vying for new orders. The management is confident of bagging one of the two EPC contracts worth INR 60-65 bn from Rajasthan SEB despite BHEL being L1. The order is expected to be the next key trigger for the stock.
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
--
For Anything related with Stock market be Online at
http://www.niftyviews.com/
Get free updates on your mobile phone. Sms "Join TSR " and send to 09223492234
FOR TRIAL STOCK/NIFTY/OPTION CALLS
You received this message because you are subscribed to Google Group "STOCKRESEARCHER" group.
To post to this group, send an email to STOCKRESEARCHER@googlegroups.com
To unsubscribe email
Stockresearcher-unsubscribe@googlegroups.com
for more info visit
http://groups.google.com/group/STOCKRESEARCHER?hl=en-GB
.
This is Not a Spam Mail.
Disclaimer :-
"The opinions expressed by the members on this board are based on
their individual experience and perceptions and to share information
with other members with the best of intentions to help fellow members
in investment decisions as equity investment is a risky venture."
Posts
0 comments:
Post a Comment