Way2Wealth neutral on BGR Energy Systems

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Way2Wealth neutral on BGR Energy Systems

Way2Wealth has maintained neutral rating on BGR Energy Systems, in its November 17, 2011 research report.

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Way2Wealth has maintained neutral rating on BGR Energy Systems , in its November 17, 2011 research report.

"BGR Energy Systems, order book in Q2FY12 stands at Rs.72.8bn and it has bagged orders worth Rs.10.1bn in H1FY12. The Management has given a visibility of Rs.45-50bn in H2FY12, which includes 4X800MW turbines NTPC order. This gives a revenue visibility of more than 2yrs. Net sales have decreased by 32% due to extended monsoons and delay in delivery at client's request. High operating margins were on account of higher execution of BOP orders as compared to EPC orders. Major contribution has come from its Marwa, Jhalawar & Mettur orders. PBT was down by 34% largely hit by higher interest cost at Rs.301.8mn, up by 118% and depreciation which was up by 23% at Rs.40mn. PAT was lower by 34% to Rs.513.5mn gained by 160bps fall in tax rate to 32.4% on YoY basis."

"Capital good segment margin grew at 19.9% and profit was up by 349% to Rs.182mn. EPC segment margin expanded by 140bps to 13% but EPC segment profit lowered by 30% to Rs.879mn. Debtor cycle has shot up significantly which has led to requirement of higher working capital & in turn higher interest outgo. The Balance sheet is expected to stay stretched with more equity commitments for the BTG JV with Hitachi over the next 12-18 months. With its oscillating order inflow concerns, debtor woes, high input costs & adverse working capital cycle we believe the path ahead for BGR to continue under severe duress."

"At the CMP of Rs.280, the stock quotes a PE of 9x and 8x its FY12E and FY13E cons. EPS of Rs.32 and 35 respectively. We give a Neutral rating with a target price of Rs.280 based on a PE of 8x consolidated FY13E EPS of Rs.35 until the company manages to emerge out of its current adverse cycle," says Way2Wealth research report.

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To read the full report click on the attachment