Angel Broking neutral on Areva T&D

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Angel Broking neutral on Areva T&D

Angel Broking has maintained neutral rating on Areva T&D, in its May 17, 2011 research report.

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Angel Broking has maintained neutral rating on Areva T&D , in its May 17, 2011 research report.

"Areva T&D (Areva) posted good set of results for 1QCY2011 aided mainly by lower base. The top line and bottom line grew strongly, but EBITDA margin was lower than our estimates. Revenue increased by 28.1% yoy to Rs 995cr (Rs 777cr), while PAT grew by nearly eight-fold to Rs 29cr (Rs 3cr). Order inflow increased by 23.1% to Rs 1,253cr. Going forward, the pricing pressure in the T&D segment is expected to continue due to increasing competition, which weighs heavily on the stock."

"Higher sales volume during 1QCY2011 compared to lower volumes amid execution issues in 1QCY2010 helped Areva deliver 28.1% yoy growth in revenue to Rs 995cr (Rs 777cr). EBITDA margin for the quarter also expanded by 273bp to 8.4% as fixed manufacturing and production costs were spread over large volumes. Higher sales volume and margin expansion enabled Areva to post nearly eight-fold yoy growth in PAT to Rs 29cr (Rs 3cr)."

"Central utilities have been delaying their orders on account of non-availability of land on time, resulting in lower number of 765kV projects being finalised. Ordering scenario from state utilities has also remained flat. Further, Korean and Chinese suppliers continue to quote very aggressive prices in transformers. While the growth trajectory looks promising with a decent order book of Rs 5,204cr (1.1x CY2011E revenue), we remain cautious on the above concerns and believe the stock will trade sideways until the T&D segment revives post 1HCY2011 as guided by the management. At the CMP of Rs 264, the stock trades at 29.6x CY2011E EPS and 22.3x CY2012E EPS. Historically, the stock has traded at an average P/E of 28x. We believe the stock is fairly valued and, hence, we continue to remain Neutral on the stock," says Angel Broking research report.

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To read the full report click on the attachment