Angel Broking neutral on BGR Energy

Angel Broking has maintained neutral rating on BGR Energy, in its February 08, 2013 research report.
 
“BGR Energy (BGR) reported a flat top-line performance at Rs805cr and 24% yoy decline in PAT to Rs41cr for 3QFY2013. The increase in interest cost (due to higher working capital borrowings) and margin pressure led to a sharp decline in PAT.”
 
“The 22% yoy decline in revenue from the Capital Goods segment at Rs59cr (Rs75cr in 3QFY2012) was offset by a 2.4% yoy growth in revenue from the Construction and EPC segment at Rs746cr (Rs729cr in 3QFY2012). On the operating front, the EBITDA margin contracted by 259bp yoy to 13.7%, mainly on account of a 289bp yoy contraction in margin of the Construction and EPC segment. Interest cost grew by 9% yoy to Rs50cr (owing to elevated interest rate scenario and enhanced working capital requirements). Consequently, the net profit declined by 24% yoy to Rs41cr. During the quarter, the company has won the Notification of Award (NOA) from NTPC’s Lara STTP for steam turbine and generators. The order is approximately valued at Rs1,548cr. Order backlog at the end of 3QFY2013 stood at ~Rs13,578cr up 65% yoy as NTPC bulk order is recognized in the order book. However, the company has bid aggressively for some of these orders and hence, we remain cautious on the margin front.”
 
“BGR's working capital has seen deterioration over the past few quarters, mainly due to high receivables. In our view, tight liquidity is likely to transmit negatively on BGR's books. At the current market price, the stock is trading at a PE multiple of 9.0x on our FY2014E EPS, which we believe is reasonable amidst the structural issues (slowdown of order inflow in boiler turbine generator [BTG] space and high leverage) faced by the company. Hence, we maintain our Neutral view on the stock,” says Angel Broking research report.

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