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YEmarch(Rsmn) NetSales EBITDA ReportedPAT Adj.PAT Adj.EPS(Rs.) ROE(%) PE(x) Mcap/SalesFY13 31,519 2,475 841 671 2.62 7.5% 64.0 1.8FY14E 32,470 2,986 819 819 3.2 7.7% 77.8 2.0FY15E 37,148 3,880 2,481 1,281 5.0 9.7% 49.8 1.7FY16E 42,547 4,851 2,466 2,466 9.6 16.2% 25.9 1.5
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AlstomT&D Sensex
IndiaNivesh Research IndiaNivesh Securities Private Limited601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
Initiating CoverageMarch 31, 2014
Alstom T&D India Ltd.
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
STOCK INFO
BSE 522275
NSE ALSTOMT&D
Bloomberg ATD IN
Reuters ALST.NS
Sector Heavy Electrical Equipment
Face Value (Rs) 2
Equity Capital (Rs mn) 12,256Mkt Cap (Rs mn) 63,755.59
52w H/L 255/108
3m Avg Daily Volume(BSE+NSE) 97,879
SHAREHOLDING PATTERN %
(as on 31st Dec. 2013)
Promoters 75.00
FIIs 0.53
DIIs 16.12
Public & Others 8.35
STOCK PERFORMANCE (%) 1m 3m 12m
ALSTOM T&D 23.84 16.05 56.13SENSEX 5.78 5.41 18.60
ALSTOM T&D v/s SENSEX
Source: Capitaline, IndiaNivesh Research
Source: BSE
Source: Cline; IndiaNivesh Research
Daljeet S. Kohli
Head of Research
Mobile: +91 77383 93371, 99205 94087
Tel: +91 22 66188826
Rahul Koli
Research Associate
Mobile: +91 77383 93411
Tel: +91 22 66188833
Financial Performance
CMP : Rs.249
Rating : BUY
Target : Rs.289
Rating : BUY
Target : Rs.259
Current Previous Alstom T&D is a leading player in power transmission products, projects andservices in India. Company was part of Areva T&D group. In the year 2009, Alstom
and Schneider acquired global transmission and distribution business of Areva
T&D. In Nov-2011, company transferred its distribution business (loss making/
low margin business) to Schneider and transmission business was retained with
the company. The name of the company was changed from Areva T&D to its
present name Alstom T&D in Jan-2012. Now Company is part of Alstom Group
(Headquartered in France), which is one of the global leaders in power generation,
power transmission and rail infrastructure.
Investment Rationale
Latent demand in the sector gives long term visibility: India has historically
underinvested in power transmission sector. With large increase in power generation
capacity, transmission capacity is set to follow. Rise in transmission capital
expenditure plan gives better long term visibility for the companies serving the
sector.
Abating competition, early mover advantage, leadership position and new areas
of opportunity: competition level in PGCIL tendering has started abating in past
one year. Company has localized most of the products and technology needed for
the sector ahead of its peers. Company has been biggest receiver of PGCIL orders
and also enjoys leadership position in emerging opportunities like automation.
Combination of all this factors is likely to boost revenue growth and expansion in
profit margin.
Reform in power sector likely to kick start capital expenditure from other players
in power sector: Several steps were being taken in the past couple of quarters by
government to revive the momentum in power sector. We believe that the steps
taken to repair dilapidated sector should start bearing fruits in next couple of
quarters and sector should witness a rise in much needed capital expenditure from
SEBs, power generating companies and Industry/Infrastructure companies.
Limited downside and large upside potential: We've built three scenarios to gaze
the potential financial performance of the company. In base case PAT is likely to be
3.7x in FY16E vs FY13A. In optimistic case PAT is likely to be 4.6x in FY16E vs FY13A
and even in pessimistic scenario PAT is likely to be ~40% higher than FY14E levels,
which effectively means that there is limited downside and large upside potential
Valuation and Recommendation
At CMP of Rs. 249, stock is trading at FY15E and FY16E PE multiple of 49.8x and
25.9x. Given latent demand in the power T&D sector, leadership position of thecompany, likely capex cycle revival and likely improvement in margins for the
company, We initiate coverage of the stock with BUY recommendation and target
price of Rs.289 (30x FY16E EPS).
Best placed (amongst peers) to exploit Power transmission sector opportunity
Source: Company Filings; IndiaNivesh Research
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18,524 21,151
50,805
88,53793,000
0
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9th 10th 11th 12th 13thE E
2933
8226
3312
2441
917
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9000
World OECD China Brazil India
India much
below world
average
Investment rationale
A) Latent demand in the sectorIndia has perennially remained a power deficit country. Huge potential exist for
power generation and Transmission & Distribution sector in the country as countrys
per capita electricity consumption at 917 kwh is much below the world average of2933 kwh.
Source: IEA;CEA; IndiaNivesh Research
To tackle the menace of power deficit and maintain countrys high economic growth,
Indian government has undertaken a massive power generation and transmission
capacity addition plans in the country. India has added ~50,000 mw in 11thplan(2007-
12) and plans to add ~88,000 and ~93,000 mw in 12 th(2012-17)and 13th(2017-22)
plan respectively. Country has installed capacity of 232,000 mw as of 31stjan 2014.
Planwise Capacity addition (MW)
Source:CEA; MoP; IndiaNivesh Research
Note: Excluding Renewable Capacity additions
Massive capacity addition in generation secor will be of little use without robust
transmission and distribution network in the country. India has historiallly
underinvested in its T&D sector vs generation sector. To make the transmission
network more robust and supplement the addition of generation capacity, aboutRs 1.4 tn were spent in 11thplan. 12thand 13thplans are set to observe greater
investment of Rs 1.8 tn and Rs 2 tn respectively.
Per Capita Electricity Consumption (kwh/capita)
Massive power generation and transmission
capacity addition plans in the country
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178
200
222 225 225 225
0
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100
150
200
250
FY12 FY13 FY14E FY15E FY16E FY17E
Capital Expenditure Target of PGCIL(Rs bn)
Capex visibility for coming years from biggest customer
1,400
1,800
2,000
46%
76% 79%
0%
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30%
40%50%
60%
70%
80%
90%
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2,000
2,500
11th FYP 12th FYP 13th FYP
Investment in Transmission(Rs bn) T&D as % of generation capex
Investment in Transmission & T&D as % of generation capex
Source: MoP; IndiaNivesh Research
Power Grid corporation of india (PGCIL),countrys central transmission utility, is single
biggest customer for T&D companies.PGCIL has plans to spend about Rs 1.1 tn in
12thplan. Out of the total capital expenditure of PGCIL the addresable orders for
Alstom T&D (relating to substation,electrical equipments and systems) are likely to
be about 30-35% (~Rs 350 bn) of total. A well planned year wise capital expenditure
target set by PGCIL gives good visibility for the T&D companies.
Capital Expenditure Target of PGCIL(Rs bn)
Source: PGCI; IndiaNivesh Research
B) Abating competition, early mover advantage,
leadership position among peers, New areas ofopportunity
i) Reducing Competition:
At the beginning of 12 th plan, many domestic contractors and foreign
companies(mainly Chinese and Koreans) were very aggressive in bidding process,
this led to drop in margins for all the companies in the sector. However, Local
manufcaturing facility requirement set by PGCIL for many equipments, tough
contractual obligations, cash flow problems on the part of many contractors has
caused many players to exit or become less aggressive in the PGCIL tendering. After
this connsolidation in the sector, we expect margins for the remaining players likely
to improve from hereon.
T&D capex as % of generation capex to rise in
coming 5 year plan
Capex visibility for coming years from biggest
customer PGCIL
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Alstom T&D has emerged as leading order
receiver from PGCIL due to higher
localisation vs peers and competitive
strength in terms of technology
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FY12 FY13 FY14*
Reduced aggressiveness
amongmany players in
PGCIL tenders
Abating Competition (Rs mn):
Source: PGCIL; IndiaNivesh Research
ii) Early Mover Advantage:
Alstom T&D started its localisation programme early in 2007 and is regularly
absorbing technology from its parent to effectively compete in domestic market.ABB and Siemens, the other two close competitor in the race started late and are
yet to localise all the products and technologies related to transmission.
This early mover advantage is likely to help company gain larger share of products
and projects in offing.
Year Alstom T&D ABB Siemens2007 765 kv transformer
2008220 kv GIS
Shunt Reactors
145 kv GIS245-420 kv transformer
2009 420 kv GIS 145 kv circuit breaker
2010circuit breaker
765 kv transformer
and circuit breaker145-220 kv GIS
2012
765 kV Innovative Elliptical Design,
1200 kV Class Technology absorption
for Instrument Transformer CVT and Disconnector,
420 kV GIS Mono chamber technology
Source: Company Filings; IndiaNivesh Research
iii) Leading Position amongst peers:
Due to its greater localisation and competitive strenght,Alstom T&D has emerged
as a leading order rceiver in PGCIL tendering for electrical equipments,projects and
services for 12thplan in FY12-14 period. Since other non-serious competitor has
started become less agrresive in bidding process, this will further help company to
strenghen its leadership position.
Total orders received from PGCIL in FY12-FY14*-(Rs mn)
Source: PGCIL; IndiaNivesh Research
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Reactors transforme rs automation AIS S /S citc uit
breakers
hvdc GIS S/S
FY12 FY13 FY14*
Automation
picking up
Steady
rise in
GIS
0
2,658
3,571
0
726
0125
680
00
500
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3,000
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FY12 FY13 FY14*
Alstom T&D Siemens Chemtrols
23 19
20 17
8 35
4524
3 525
6424
59
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FY12A-14A FY15E-17E
GIS S/S
hvdc
citcuit breakers
AIS S/S
automation
transformers
Reactors
iv) New areas of opportunity: Automation,GIS
Aim of PGCIL is to make Indian grid more smarter and after failure of grid in july-
2012 in northen and eastern part of india, PGCIL has become more proactive to
tackle the issue. PGCIL ordering is likely to see change for next couple of years
leading to more orders for automation systems and GIS apart from regular orders
of AIS substations,reactors and transformers.
PGCIL Ordering (Rs.mn)
Source: PGCIL; IndiaNivesh Research
PGCIL Ordering (Rs.bn)
Source: PGCIL; IndiaNivesh Research
Alstom T&D is likely to be the biggest beneficiary of this order pattern change from
PGCIL as it leads the automation order bidding where Siemens and Chemtrols are
distant second and third
PGCIL Automation Orders (Rs mn)
Source: PGCIL; IndiaNivesh Research
Automation, GIS are new areas of opportunity
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Hyosung New Northeast Elec.Group Xian China Pinggao Alstom T&D
FY12 FY13 FY14*
Marginal
presence of the
only Indian
company
But Chinese players dominate the GIS where Alstom T&D is the onlyindian company having marginal presence
Currently GIS orders are completely dominated by chinese players due to aggressive
bidding and hardly any domestic firm is able to penetrate their castle. However, as
weve seen in last one year for other orders, any reduction in aggression from the
Chinese companies will be beneficial for the companies who are ready with
technology. As of now only Alstom T&D has localised GIS technology upto 400 kvand higher kv technolgy support is available from parent. Other companies like
Siemens, ABB, BHEL and Crompton Greaves have localised facility only upto 220 kv.
Siemens and ABB have support available from parent for higher kv technology but
that puts them at cost disadvantage vs player who has localised facility.
PGCIL GIS Orders (Rs mn)
Source: PGCIL; IndiaNivesh Research
C) Reform in power sector likely to kick start capitalexpenditure from other players in power sector
Power sector has remained under pressure due to slew of issues like fuel (coal and
gas) availability, fuel cost escalation due to import of coal and gas, poor financial
health of SEBs, land and environmental issues etc. Effect of all this factors on the
order book and eventually financials of the power capital goods companies has
been harsh.
Government and regulatory agencies have taken many steps to resolve the stumbling
issues and revive the animal spirit of the sector. Major steps taken by government
and regulatory agencies like financial restructuring of many SEBs to improve their
financial health, cost pass through allowed for some power plants for increased
fuel cost, regular electricity tariff hikes allowed by electricity regulatory commissionto take care of escalating cost for discoms, establishing coal sector regulator to sort
out grievances of parties involved etc. are likely to revive the momentum in the
sector in next couple of quarters and sector can witness revival in capital expenditure
from other players(apart from PGCIL) like power utilities/generators, SEBs and
industry/infrastructure companies, which will provide growth impetus for the T&D
Capital goods companies.
Reforms in power sector likely to bear fruits
in coming quarters
GIS could be the next growth driver
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Source: IndiaNivesh Research
Financials
Alstom T&Ds order intake and financial Performance:Since the sector has been riddled with many issues in the past, capex in power
sector as a whole & transmission in particular took a sharp decline in last few years.
In order to estimate the future prospects of the order flow,we have built in threescenarios to gaze what kind of number may be expected.
Base Case Scenario
Assumptions:
Company gets orders from two sources PGCIL and other segments (industry,
SEBs etc). We expect PGCIL ordering to take place as planned and given likely
improvement in power sector scenario, quarterly order intake rate (for the
company) from other segments is expected to gradually pick up to normal
(but less than highest rate seen in past) rate of 7-8 bn per quarter for the
company from current FY14 rate of ~6.6 bn.
Execution rate for the company had taken beating in past two years due to
low level of activity in the power sector, Company has improved its execution
pace in past couple of quarters. We expect company to imrove its execution
rate gradually from current ~60% to 70% in next 2 years. (However we dont
expect company to reach its peak execution rate of ~80% in next 2 years).
We expect Company to retire its current debt of ~5 bn in next 2 years.
40,12942,139 41,848
39,444
36,09934,564
37,830
44,640
5%
-1%
-6%
-8%
-4%
9%
18%
-10%
-5%
0%
5%
10%
15%
20%
0
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CY08 CY09 CY10 FY12* FY13 FY14E FY15E FY16E
Order Intake (Rs mn) Growth %
Order Intake likely to improve by 10% in FY15E and 18% inFY16EDue to Slump in power sector, companys order intake had dropped by ~4-8% in
last two years,however we expect that on back of leadership position in PGCILtendering, new areas of opportunity and likely revival in capital expenditure cycle
from other sectors, companys order intake to rise by 9% and 18% in FY15E and
FY16E respectively.
Order Intake(Rs mn) & Growth(%)
Source: Company Filings; IndiaNivesh Research
Note: Numbers till CY10 includes erstwhile distribution business,excludes HVDC order
Base Scenario
Rs mn FY14E FY15E FY16E
Order Received 34,564 37,830 44,640
Order Book 64,351 65,033 67,126
Net Revenue 32,470 37,148 42,547
EBITDA 2,986 3,880 4,851
EBITDA Margin % 9.2% 10.4% 11.4%
Adj.PAT 819 1,281 2,466
Adj.PAT Margin % 2.5% 3.4% 5.8%
Adj.EPS 3.20 5.00 9.63
P/E 78 50 26
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26,513
35,789
40,331
31,135 31,519 32,470
37,148
42,547
35%
13%
-23%
1%3%
14% 15%
-30%
-20%
-10%
0%
10%
20%
30%
40%
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CY08 CY09 CY10 FY12* FY13 FY14E FY15E FY16E
Net Revenue (Rs mn) Growth %
1.51.3
1.2
1.5
2.0 2.0
1.8 1.5
0.0
0.5
1.0
1.5
2.0
2.5
CY08 CY09 CY10 FY12* FY13 FY14E FY15E FY16E
Book to Bill Ratio
Topline to grow ~11% CAGR between FY13-16EPace of project excecution had taken a hit in last 1-2 years due to low level of activity
in power sector, however; Company has improved its execution pace in past couple
of quarters and We expect companys topline to grow by ~11% CAGR between
FY13-FY16E on back of better exceution pace and likely increase in order intake.
Net Revenue (Rs mn) & Growth (%)
Source: Company Filings; IndiaNivesh Research
Note: Numbers till CY10 includes erstwhile distribution busines,FY12 numbers are adjusted for 12 month
Earnings to be 3.7x in FY16E compare to FY13 level on backof ~360 bps margin expansion:Although we expect topline to grow by ~11% CAGR between FY13-16E; we expect
the bottomline to be 3.7x in FY16E from its FY13 level on back of improvement in
margin by ~360 bps between FY13 and FY16E. Improvement in margin for the
company is expected due to reduction in competition level in PGCIL tendering, likely
increase in high technology products like automation, GIS etc. which are better
margin orders, rise in Capital expenditure from other sectors and better pace of
order execution.
Book to Bill Ratio
Source: Company Filings; IndiaNivesh Research
Note: Numbers till CY10 includes erstwhile distribution business
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2,544
1,9881,867
1,191
671819
1,281
2,466
9.58%
5.55%4.63%
3.82%
2.12%2.52%
3.45%
5.79%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
0
500
1,000
1,500
2,000
2,500
3,000
CY08 CY09 CY10 FY12* FY13 FY14E FY15E FY16E
Adj.PAT Adj.PAT Margin %
Adj. PAT (Rs mn) & Adj. PAT margin (%)
Source: Company Filings; IndiaNivesh Research
Note: Numbers till CY10 includes erstwhile distribution busines,FY12 numbers are adjusted for 12 months.
Alternative scenario
Optimistic Scenario
Assumptions:
1. In case of faster than expected (base case) revival in economicrecovery, order intake from other segments are likely to rise faster(near to its highest quartely rate seen in 2009-10) than in base caseand company can witness additional source of order intake fromrenewables and windfall order gain of HVDC order.
2. Execution pace to pick up faster than base case3. Company to retire its debt of ~5 bn in next two years
In optimistic scenario, we expect order intake to rise 27% and 16% inFY15E and FY16E respectively. Stocks Adj EPS is likely to be 4.6x in FY16Efrom its FY13 level. The stock may rise to Rs 367. (conservative multipleof 25x FY16E Adj EPS) in optimistic case.
We expect very low probability of this scenario playing out.Source: IndiaNivesh Research
Source: IndiaNivesh Research
Pessimistic Scenario:
Assumptions:
1. In case of prolonged economic slump , the likely order intake from
other segments like industry/infrastructure and discoms/SEBs willlikely ramain muted
2. Excecution pace of the company should also suffer due to depressedenvironment and likely to take longer (than Base case) to return tonormal rate.
3. Company not able to retire its debt of Rs ~5 bn in next 2 years.
In Pessimistic Scenario,we expect the order book of the company to fallto Rs ~57 bn from current level of about ~64.3 bn. Even in this case AdjEPS is likely to be ~40% higher than FY14E levels. However, we expectthat current euphoria in the stock may cool down for time being andstock may take a fall to Rs 143-167 level. (Valuing at 30x and 35x FY16EAdj EPS). Since 13thfive year plan ordering is likely to begin in next 2 yearstime, we dont expect market to give very low multiple to value the stockin pessimistic scenario.
We expect close to nil probability of this scenario playing out.
Optimistic Scenario
Rs mn FY14E FY15E FY16E
Order Received 34,564 43,830 50,640
Order Book 64,351 64,842 68,693
Net Revenue 32,470 43,339 46,789
EBITDA 2,986 5,877 6,788
EBITDA Margin % 9.2% 13.6% 14.5%Adj.PAT 819 2,618 3,763
Adj.PAT Margin % 2.5% 6.0% 8.0%
Adj.EPS 3.20 10.23 14.70
P/E 78 24 17
Pessimistic Scenario
Rs mn FY14E FY15E FY16E
Order Received 34,564 29,830 34,640
Order Book 64,351 60,129 57,166Net Revenue 32,470 34,052 37,603
EBITDA 2,986 3,060 3,395
EBITDA Margin % 9.2% 9.0% 9.0%
Adj.PAT 819 664 1,222
Adj.PAT Margin % 2.5% 1.9% 3.2%
Adj.EPS 3.20 2.59 4.77
P/E 78 96 52
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Companys recent nine month performance:For the 9 month of FY14 companys topline has increased by 9% Y-o-Y, due to increase
in margin of orders received and better execution pace,EBITDA margin has also
improved by ~200 bps to 9.26%. Adjusted EPS for the company has jumped by 133%
Y-o-Y in 9MFY14.
Company management expects to maintain/improve the margins from current level.
Alstom T&D India Ltd.
Rs.In mn Q3FY14 Q3FY13 Q2FY14 % Y-o-Y % Q-o-Q 9MFY14 9MFY13 % Y-o-Y
Net Income from operations 8,472 7,112 8,022 19% 6% 22,090 20,586 7%
Other Operating Income 12 18 146 -34% -92% 419 129 226%
Total Income from operations 8,483 7,129 8,168 19% 4% 22,509 20,715 9%
Expenditure
Materials and related cost 5,587 4,798 5,943 16% -6% 15,525 14,738 5%
Purchase of stock in trade - - - - -
Changes in inventories etc 295 (70) (670) (918) (1,289)Gross Margin % 30.66% 33.69% 35.45% (302) (479) 35.11% 35.07% 3
Employee benefit expense 829 815 843 2% -2% 2,519 2,436 3%
Other expenses 1,050 1,053 1,296 0% -19% 3,299 3,316 -1%
EBITDA 722 534 757 35% -5% 2,084 1,513 38%
EBITDA Margin % 8.51% 7.50% 9.27% 101 (77) 9.26% 7.30% 196
Other Income 20 3 10 490% 92% 31 14 122%
Depreciation 225 206 216 9% 4% 648 616 5%
EBIT 517 332 552 56% -6% 1,467 910 61%
Finance Cost 230 186 237 24% -3% 637 543 17%
Exceptional Item - - - - 121
PBT 287 146 315 97% -9% 830 489 70%
Tax expense (97.48) (47.30) (107.16) (282) (178)
Effective tax rate % 33.99% 32.46% 33.99% 152 (0) 33.99% 36.49% (250)
Reported Net Profit 189 98 208 92% -9% 548 310 77%
Adj. PAT 189 96 201 97% -6% 528 225 135%
Reported PAT Margin % 2.23% 1.38% 2.54% 85 (32) 2.43% 1.50% 93
Core PAT Margin % 2.23% 1.35% 2.46% 88 (23) 2.34% 1.08% 126
Reported EPS (Rs) 0.78 0.41 0.87 90% -10% 2.28 1.30 75%
Adj. EPS 0.78 0.40 0.84 95% -7% 2.20 0.94 133%
Standalone, Source: Company, IndiaNivesh Research
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OutlookPower transmission grid in india is moving from low and medium voltage(220 kv
and below) to high (400 kv) and extra high voltage (765 kv and above). In addition
to that, the transmission grid is also becoming technologically more advance with
introduction of automation,HVDC and GIS technologies. Companys that aretechnologically advanced and have localised their technologies and facilities are
likely to snatch greater part of available orders pie.
Alstom T&D has localised large number of products and technologies needed in
power transmission ahead of its peers, competition intensity has started abating in
PGCIL tendering, company has leadership position in automation and GIS (among
indian firm) offerings, due to combination of all these factors, we sense that Alstom
T&D is well placed to exploit the opportunity that indian transmission sector has to
offer
We expect companys net revenue to grow by ~11% CAGR in FY13-16E and PAT
Margins to improve by ~360 bps in FY13-16E and earning to become 3.7x in FY16E
from FY13 level.
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Close -Unit Curr 20.0 X 30.0 X 40.0 X 50.0 X 70.0 X
Valuation
Valuation and RecommendationDue to cyclical nature of the business we observe wide swing in the PE ratio for the
company, however average PE multiple for the company has been about 30. At
CMP of Rs. 249, stock is trading at FY15E and FY16E PE multiple of 49.8x and 25.9x.
Given latent demand in the power T&D sector, leadership position of the company,
likely capex cycle revival and likely improvement in margins for the company, We
initiate coverage of the stock with BUY recommendation and target price of Rs.289
(30x FY16E Adj.EPS Rs.9.63).
PE Multiple
Source: Cline; IndiaNivesh Research
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Manufacturing Units
Sr.No. Location Area (Acre) Products Manufactured/Services Rendered
1 Vadodara,Gujarat 34.2 Power Transformers,Shunt Reactors,Converter Transformer
2 Pallavaram,Tamil nadu 27.2 Protection relays,Substation automation
3 Hosur,Tamil nadu 21.6 Instrument Transformer,Capacitive Voltage Transformer,Line Traps,Condenser Bushing
4 Padappai,Tamil nadu 14.4 Switchgear,GIS
5 Naini,Uttar pradesh 21.2 Transformers(generator,auto,furnace,traction,regulating,power)
6 Noida,Uttar Pradesh 4.0 Automation cubicles,Project Management and Services
Source:Company
About Alstom T&D and latest
developmentsAlstom T&D is the leading player in power transmission sector in India. Company is
part of Alstom Group (Headquartered in France), which is one of the global leadersin power generation, power transmission and rail infrastructure. The Alstom group
has presence in over 100 countries, with sales of over 20 bn in fiscal 2012-13.
In the year 2009, Alstom and Schneider groups entered into a consortium agreement
to jointly acquire the global transmission and distribution business of Areva T&D
group and subsequently separate the same such that Alstom group would acquire
the global transmission business and Schneider group would acquire the global
distribution business.
As agreed earlier with Schneider group, in Nov-2011 Company transferred the
distribution business (below 66 kv) to Schneider group. The name of the company
was changed from Areva T&D to its present name Alstom T&D in Jan-2012.
Earlier parent shareholding was 80.31% which has been reduced to 75%-to meet
the SEBI requirement of minimum 25% public shareholding- by issuing new equity
shares through institutional placement program in nov-2013.company received Rs
2,795.5 mn through this placement.
Company has also entered into Agreement for sale for its Bengaluru land for
consideration of Rs 1.2 bn.
Company has total debt of Rs 5 bn as of 31stdec-2013, which management plans to
retire in next 12-18 months
Manufacturing units:Company has localized facilities in Gujarat, Tamil nadu and Uttar Pradesh to cater to
broad requirement of Indian T&D market. Details of facilities are given below.
Companys offerings:Company offers broad range of electrical and automation products in T&D market
from 66 kv to 765 kv and 1200 kv. Major products offering include transformers,
substations (AIS and GIS) and automation products and services. Company also
undertakes turkey projects in T&D space for substations etc. products and their
brief description is given in table below.
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Products/Solutions
Sr.No. Products Key Functions/Features
1 Air In su lated S witch gears
a. Circuit Breakers Used for isolation or connection of live networks
b. Disconnectors Offline switches providing visible and reliable air gap isolation
c. Instrument Transformers Provide current and voltage measurement for secondary equipment such as meters etc
2Gas Insulated Switchgears
(upto 400 kv)
GIS requires much less floor space compare to Air insulated swi tchgears,
Ideal for places where space is limi ted or costly
3 P ow er Transfo rme rs Conne ct AC ne tw orks of di ffe re nt vol tage le ve ls to al low pow er ex change be tw ee n the m
4 Solution Business Turnkey Projects (66 kv to 765 kv,HVDC,FACTS)
5 A utom ati on Busi ne ss
a. S ubs tati on A uto mati on Ef fi ci ent tran sm is si on and d is tri bu ti on o f e le ctri ci ty
b. Network Management Solution Key smart grid enablers to incorporate and manage centralised and distributed power managementSource:Company
Risk Factors1) Company is heavily dependent on single customer PGCIL (accouting for ~40%
of order intake). Any change in capex plan by PGCIL or deterioation in its
financial condition will be big negative for the company
2) Copper and aluminum are the major raw materials for the
company(accounting for ~50% of raw material) and as per historical analysis,
for every 1% rise in these metal prices; gross margin for the company drops
by about 20-30 bps. Sudden surge in prices of these metals will be negative
for the margins of the company.
Sensitivity of gross margin to Copper and Aluminum prices
Source:IMF,Company; IndiaNivesh Research
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Standalone Financials
Source: Company Filings; IndiaNivesh Research
Cash Flow Statement
Rs mn FY12 FY13 FY14E FY15E FY16E
PBT 2,376 1,226 1,219 3,702 3,680
Depreciation and Amortisation 1,014 813 858 948 1,041
Other non cash items 878 1,024 531 (770) 130
WC Changes (1,104) 1,047 (3,652) 415 1,011
Tax expense (643) (82) (410) (1,222) (1,214)
Cash flow from operations 2,521 4,028 (1,454) 3,073 4,648
Capital Expenditure,net (1,048) (856) (1,261) (927) (1,213)
Free cash flow to firm 1,473 3,172 (2,715) 2,146 3,435
Cash flow from investing (857) (617) (1,241) 293 (1,193)
Equity Capital Raised 0 0 2,796 0 0
Loan availed (Repaid) (863) (1,801) 823 (2,500) (2,500)
Interest paid (656) (662) (551) (450) (150)
Dividend paid (incl tax) (499) (497) (503) (503) (503)
Cash flow from financing (2,018) (2,960) 2,565 (3,453) (3,153)
Net change in cash (353) 450 (130) (87) 302
Cash at the beginning of year 1,199 331 781 651 564
Cash at the end of year 331 781 651 564 866
Income Statement
Rs mn F Y1 2 (1 5 Mont hs) FY1 3 FY1 4E FY1 5E FY1 6E
Net Operating Revenue 41,391 31,519 32,470 37,148 42,547
Expenses
Consumption of raw mate rial 28,825 20, 953 21,380 24,146 27,656
Gross Margin % 30.36% 33.52% 34.15% 35.00% 35.00%
Employee Cost 3,636 3,246 3,410 3,921 4,509
Other expenses 4,747 4,845 4,694 5,201 5,531
EBITDA 4,182 2,475 2,986 3,880 4,851
EBITDA Margin % 10.10% 7.85% 9.20% 10.45% 11.40%
Other Income 153 169 20 20 20
Depreciation and amortisation 1,014 813 858 948 1,041
EBIT 3,321 1,831 2,148 2,952 3,830
EBIT margin % 7.99% 5.78% 6.61% 7.94% 9.00%
Finance cost 1,090 775 929 450 150
Exceptional/Extraordinary item 145 170 0 1,200 0
PBT 2,376 1,226 1,219 3,702 3,680
Tax expense (752) (385) (410) (1,222) (1,214)
Effective tax rate % 31.64% 31.41% 33.63% 33.00% 33.00%
Reported Net P rofit 1,624 841 819 2 ,481 2 ,466
Reported Net Profit margin % 3.91% 2.65% 2.52% 6.67% 5.79%
Adj. Net Profit 1,479 671 819 1,281 2,466
Adj. Net Profit Margin % 3.56% 2.12% 2.52% 3.45% 5.79%
Balance Sheet
Rs mn FY12 FY13 FY14E FY15E FY16E
Share Capital 478 478 512 512 512
Reserves and Surplus 8,286 8,624 11,702 13,679 15,642
Networth 8,764 9,102 12,214 14,191 16,154
Long term borrowings 0 661 0 0 0
Deferred tax liabilities,net 150 124 124 124 124
Long term provisions 153 327 327 327 327
Total Non current liabilities 303 1,111 450 450 450
Short term borrowings 5,935 3,516 5,000 2,500 0
Trade payables 15,568 18,126 16,003 17,077 17,330
Other current liabilities 5,925 8,239 9,092 11,144 14,891
Short term provisions 961 1,330 1,330 1,330 1,330
T ot al curren t lia bil ities 28,3 89 31 ,2 11 31 ,42 4 32, 05 2 3 3,552
T ot al Eq uity an d Li abi li ty 37 ,4 55 41 ,424 44,08 8 4 6, 69 3 5 0,1 56
Net Block 6,487 6,198 6,326 6,469 6,625
Capital work in progress 182 535 809 647 662
Non current investments 0 0 0 0 0
Long term loans and advances 105 235 235 235 235
Total Non current assets 6,774 6,968 7,371 7,350 7,522
Inventories 5,554 6,942 7,483 8,451 9,679
Trade receivables 18,023 17,146 17,859 19,317 19,997
Cash and Cash equivalent 331 781 651 564 866
Loans and advances 2,907 3,531 3,572 3,572 3,572
Other current assets 3,875 6,057 7,143 7,430 8,509
Total current assets 30,689 34,458 36,709 39,334 42,624
Total Assets 37,455 41,424 44,088 46,693 50,156
Key Ratios
FY12 FY13 FY14E FY15E FY16E
EPS Adj (Rs) 6.2 2.6 3.2 5.0 9.6
EPS Reported (Rs) 6.8 3.5 3.2 9.7 9.6
DPS (Rs) 1.8 1.7 1.7 1.7 1.7
BVPS (Rs) 36.7 35.5 47.7 55.4 63.1
ROCI 9.5% 9.0% 10.2% 15.9%
ROE 7.5% 7.7% 9.7% 16.2%
Inventory days 66 109 123 120 120
Sundry debtors days 174 204 197 183 169
Trade Payable days 213 275 284 240 217
P/E 21.0 64.0 77.8 49.8 25.9
P/BV 3.9 6.3 5.2 4.5 3.9
EV/EBITDA 9.5 24.6 22.8 16.9 13.0
Dividend Yield % 1.3% 0.7% 0.7% 0.7% 0.7%
m cap/sales 0.8 1.8 2.0 1.7 1.5
m cap/order book 0.7 0.9 1.0 1.0 0.9
debt/equity 0.7 0.5 0.4 0.2 0.0
debt/ebitda 1.4 1.7 1.7 0.6 0.0
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The projections and the forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant
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time. All the projections and forecasts described in this report have been prepared solely by authors of this report independently. All the forecasts were not
prepared with a view towards compliance with published guidelines or generally accepted accounting principles.
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and income from them may go up as well as down, and investors may realize profit / loss on their investments. Past performance is not a guide for future performance.
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