4QFY16 RESULT REVIEW
Techno Electric & Engineering Co Ltd
Strong execution, healthy margins and order intake
lend visibility
Robust execution under the EPC segment resulted in 47% growth of
standalone revenue to INR 3.2 bn. EBIDTA margins which was impacted in
3QFY16 witnessed improved sequential traction at 14.3%. Tax rate was low
at 12% resulting in 78% growth of PAT to INR 495 m. Order intake was healthy
at INR 6.1 bn for 4Q with current order book of Rs 26 bn (2.5x BTB) providing
growth visibility. Order pipeline is healthy and the company expects to book
INR 13-15 bn of orders in FY17e excluding solar orders. The company is also
in pursuit of transmission BOT projects, given its successful track record is
hopeful to win one of the BOT projects. Given the better than expected earnings
we have raised our FY17e/18e earnings by 3% at INR 33.7 and INR 37.6,
respectively and maintain Buy with revised SOTP target price of INR 681
(18x FY18e standalone earnings, INR 101 for wind assets, INR 18 for
transmission BOT projects.)
Margins normalize sequentially leading better operational performance.
Standalone revenue grew 47% to Rs 3.2 bn led by strong execution under EPC segment
(+48% YoY). EBIDTA margins which were impacted in 3QFY16 improved sequentially at
14.3% (down 100 bps YoY). EPC segment margins had witnessed 100 bps YoY at 17%
offsetting lower margins under wind power. Lower tax rate of 12% led to 78% YoY growth in
PAT at INR 495 m.
Healthy order pipeline provide growth visibility
Current order book of Rs 26 bn (2.5x BTB) with an order pipeline of Rs 15 bn provide growth
visibility. The company targets Rs 13 bn standalone revenue in FY17E and this is likely to
increase to Rs 1.5 bn if they win any solar project. There are six solar contracts each amounting
to Rs 7.5 bn and eight companies are technically qualified to participate. ~ 75% of the order
intake is from PGCIL and ~50% is without Chinese participation. Major SEBs under which
activity has increased are Rajasthan, MP, Telengana and North-east.
Outlook & Valuation
The company will focus more on execution in FY17e having crossed the record INR 10 bn of
EPC revenue in FY16 for the first time. The new contracts which are bidded takes into account
the higher service tax, hence margin are not expected to decline much, however, the quarterly
margins volatility is expected to continue.
Dhirendra Tiwari
+91 22 4031 3436
[email protected]
Renjith Sivaram
+91 22 4031 3414
[email protected]
Market data
Sensex
:
26,714
Sector
:
Industrial
Market Cap (INRbn)
:
30.9
Market Cap (USDbn)
:
0.459
O/S Shares (m)
:
57.1
52-wk HI/LO (INR)
:
590/401
Avg Daily Vol ('000)
:
3
Bloomberg
:
TEEC IN
Returns (%)
1m
3m
6m
12m
Absolute
4
22
(4)
20
Relative
(0)
8
(6)
25
Source: Bloomberg Source: Bloomberg Source: BloombergPrice performance vs Nifty
Source: Bloomberg Indexed to 100 Source: Bloomberg
Current Reco
: BUY
Previous Reco
: BUY
CMP
: INR540
Target Price
: INR681
Potential Return : 26%
Earnings Summary
Year ended March (INRm)
FY14
FY15
FY16
FY17e
FY18e
Revenues(INRm)
7,085
7,939
10,972
13,574
15,724
EBITDA(INRm)
1,926
2,080
2,213
2,974
3,256
EBITDA Margin (%)
27.2
26.2
20.2
21.9
20.7
PAT(INRm)
887
1,062
1,163
1,922
2,146
PAT growth (%)
(27.3)
20.0
10.5
65.5
11.7
EPS (INR)
15.3
18.4
20.3
33.7
37.6
EPS growth (%)
(27.3)
20.0
10.5
65.5
11.7
P/E(x)
35.2
29.3
26.5
16.0
14.4
P/BV(x)
3.7
3.4
3.0
2.6
2.3
EV/EBITDA(x)
18.8
17.2
15.7
11.5
9.7
Valuation
FY16 FY17e F718e
EPS (INR)
20.3
33.7
37.6
P/E(x)
26.5
16.0
14.4
P/BV(x)
3.0
2.6
2.3
EV/EBITDA(x)
15.7
11.5
9.7
Dividend Yield (%) 0.3
0.4
0.4
Shareholding pattern
Promoters
:
58%
Public
:
42%
Others
:
0%
80
100
120
140
Jun-15
Oct-15
Feb-16
Jun-16
Techno Electric
NIFTY
ANTIQUE STOCK BROKING LIMITED
FROM THE RESEARCH DESK
2 June 2016
|||||
2
Key concall takeaways
EBITDA margins for the EPC division stood at ~16.7% for Q4FY16 and ~14.3% for
FY16. Management expects margins to see a 40bps- 50bps improvement in FY17.
However, any contribution from solar orders would be margin-dilutive as management
expects a 10% margin for such orders.
Order Inflows in FY16 were INR 15bn, resulting in INR26bn, PGCIL and NTPC account
for ~75% of the order backlog. Management targets INR 13bn to INR 15bn order intake
in FY17e. The company is already L1 for orders valued at INR 3.5bn and the bid
pipeline stands at INR 10bn of orders (bids yet to be opened).
Rajasthan, Madhya Pradesh, Telangana, Uttar Pradesh, Karnataka and North-east
SEBs as some of the most active SEBs currently.
In solar EPC, the company is seeking to participate in NTPC's Andhra Pradesh solar
project. Management expects bidding to take place in the 1st week of July. INR
5bn-10bn is the average package size from solar EPC
In BOOT/BOOM, Patran project is expected to be commissioned this week. Management
guides for INR 10bn of income from this project over the complete concession period of
35 years with a capital cost of INR 2bn and an EPC size of INR 1.8bn.
The wind tariff rates have increased by 25% from April 2016, hence the overall margins
of the wind power segment is expected to improve going forward. However,management
is in discussions with prospective buyers and sees easing of challenges to come to aid the
exit process.
Quarterly financial trend
INR m
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Net Sales
1,505
1,587
1,618
2,182
1,831
2,126
3,144
3,227
YOY GROWTH (%)
15.7
26.5
30.1
1.8
21.7
34.0
94.4
47.9
EBITDA
227
306
227
337
278
435
357
462
Margins (%)
15.1
19.3
14.0
15.4
15.2
20.5
11.3
14.3
YOY GROWTH (%)
9.4
25.5
38.7
50.8
22.9
42.3
57.4
37.1
Depreciation
39
39
39
19
35
34
33
35
EBIT
188
267
188
318
244
401
324
427
Margins (%)
12.5
16.8
11.6
14.6
13.3
18.9
10.3
13.2
YOY GROWTH (%)
11.0
29.6
50.6
70.8
29.6
50.3
72.0
34.4
Other Income
14
166
7
53
8
90
7
174
Interest
42
47
41
39
29
33
31
53
PBT
160
387
154
332
223
458
300
573
Exceptional Items
(8)
(7)
(2)
16
(7)
(2)
(13)
(12)
PBT
152
379
152
349
216
456
287
560
Margins (%)
10.1
23.9
9.4
16.0
11.8
21.4
9.1
17.4
YOY GROWTH (%)
16.2
111.2
(54.9)
290.9
42.0
20.1
88.67
60.7
Tax
32
51
32
72
46
115
45
65
Net Profit
120
329
120
277
170
341
241
495
20.8
13.3
20.8
20.5
21.3
25.2
15.8
11.6
Quarterly segmental trend
INR m
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
REVENUE FROM OPERATIONS
Corporate
14
149
19
58
8
90
7
174
Energy (Power)
81
95
23
11
52
109
16
9
EPC (Construction)
1,424
1,509
1,582
2,167
1,779
2,017
3,128
3,218
Total
1,518
1,753
1,624
2,236
1,839
2,216
3,151
3,402
EBIT
Corporate
14
150
19
58
8
90
7
174
Energy (Power)
32
46
(25)
(17)
8
78
(16)
(48)
EPC (Construction)
148
230
199
347
229
322
327
548
Total
194
426
193
388
245
489
318
675
EBIT margin (%)
Corporate
100
100
100
100
100
100
100
100
Energy (Power)
40
49
(109)
(156)
15
71
(101)
(541)
EPC (Construction)
10
15
13
16
13
16
10
17
Source: Company, Antique
SOTP
Valuation Basis
Equity Value (INR mn)
INR/Sh
EPC Business
PE @ 18x
32,111
562
Wind Assets
DCF
5,738
101
Tranmission assets
DCF
1,028
18
ANTIQUE STOCK BROKING LIMITED
FROM THE RESEARCH DESK
2 June 2016
|||||
4
Financials
Profit and loss account (INRm)
Year-ended March 31 FY14
FY15
FY16 FY17e FY18e
Net Revenue 7,085 7,939 10,972 13,574 15,724 Op. Expenses 5,159 5,859 8,759 10,600 12,468 EBITDA 1,926 2,080 2,213 2,974 3,256 Depreciation 667 603 495 510 529 EBIT 1,259 1,477 1,718 2,464 2,727 Other income 120 202 375 360 391 Interest Exp. 454 431 443 320 280
Extra Ordinary Items -gain/(loss) - 1 (244) -
-Reported PBT 925 1,247 1,894 2,504 2,838
Tax 38 186 487 582 692
Reported PAT 887 1,062 1,163 1,922 2,146
Net Profit 887 1,061 1,407 1,922 2,146
Adjusted PAT 887 1,062 1,163 1,922 2,146
Adjusted EPS (INR) 15.3 18.4 20.3 33.7 37.6
Balance sheet (INRm)
Year-ended March 31 FY14
FY15
FY16 FY17e FY18e
Share Capital
Reserves & Surplus 8,371 9,147 10,145 11,774 13,626
Networth 8,371 9,147 10,145 11,774 13,626
Debt 6,077 5,405 4,083 4,526 4,001
Minority Interest 193 199 - -
-Net deferred Tax liabilities 9 7 8 8 8
Capital Employed 14,650 14,758 14,236 16,307 17,635 Gross Fixed Assets 13,404 13,526 12,019 11,163 11,183 Accumulated Depreciation 2,711 3,314 3,809 4,319 4,847
Capital work in progress 36 36 36 36 36
Net Fixed Assets 10,729 10,247 8,246 6,880 6,372 Goodwill
Investments 1,870 1,347 1,547 1,619 1,619
Non Current Investments 1,870 1,347 1,547 1,619 1,619 Current Assets, Loans & Adv. 3,900 5,219 8,744 10,789 12,949
Inventory 118 64 379 367 403
Debtors 2,060 3,449 4,963 5,800 7,000
Cash & Bank balance 481 247 1,116 3,089 3,914 Loans & advances and others 1,240 1,459 2,286 1,533 1,633 Current Liabilities & Prov. 1,848 2,058 4,300 2,981 3,305
Liabilities 1,800 1,902 4,119 2,981 3,305
Provisions 48 155 181 -
-Net Current Assets 2,051 3,162 4,444 7,807 9,644 Application of Funds 14,650 14,757 14,236 16,307 17,635
Per share data
Year-ended March 31 FY14
FY15
FY16 FY17e FY18e
No. of shares (m) 57 57 57 57 57
Diluted no. of shares (m) 57 57 57 57 57
BVPS (INR) 146.6 160.2 177.7 206.2 238.7
CEPS (INR) 27.2 29.2 29.0 42.6 46.9
DPS (INR) 1.8 1.5 1.7 1.9 2.0
Source: Company, Antique
Cash flow statement (INRm)
Year-ended March 31 FY14
FY15
FY16 FY17e FY18e
PBT 925 1,248 1,650 2,504 2,838
Depreciation & amortisation 667 603 495 510 529
Interest expense 454 431 443 320 280
(Inc)/Dec in working capital 839 (1,113) (1,281) (282) (1,012)
Tax paid 38 186 487 582 692
Other operating Cash Flow (474) (821) (1,588) (1,524) (1,774) CF from operating activities 2,449 535 206 2,110 1,552
Capital expenditure (330) (122) 1,507 855 (20)
Inc/(Dec) in investments (1,224) 522 (199) (73) -Add: Interest/Div.Income Received 120 202 375 360 391 CF from investing activities (1,434) 603 1,682 1,143 371
Inc/(Dec) in share capital (23) (33) (69) -
-Inc/(Dec) in debt (600) (672) (1,322) 443 (525)
Dividend Paid (176) (235) (294) (294) (294)
Others (454) (431) (443) (320) (280)
CF from financing activities (1,252) (1,372) (2,127) (171) (1,099)
Net cash flow (237) (234) (239) 3,082 824
Opening balance 718 481 247 8 3,090
Closing balance 481 247 8 3,090 3,915
Growth indicators (%)
Year-ended March 31 FY14
FY15
FY16 FY17e FY18e
Revenue(%) 1.2 12.1 38.2 23.7 15.8
EBITDA(%) -19.3 8.0 6.4 34.4 9.5
Adj PAT(%) -27.6 19.8 9.5 65.3 11.7
Adj EPS(%) -27.3 20.0 10.5 65.5 11.7
Valuation (x)
Year-ended March 31 FY14
FY15
FY16 FY17e FY18e
P/E 35.2 29.3 26.5 16.0 14.4 P/BV 3.7 3.4 3.0 2.6 2.3 EV/EBITDA 18.8 17.2 15.7 11.5 9.7 EV/Sales 510.8 450.4 315.9 252.2 201.9 Dividend Yield (%) 0.3 0.3 0.3 0.4 0.4
Financial ratios
Year-ended March 31 FY14
FY15
FY16 FY17e FY18e
RoE (%) 11.0 12.1 12.1 17.5 16.9 RoCE (%) 9.4 11.4 14.4 18.5 18.4 Asset/T.O (x) 0.5 0.6 0.8 1.0 1.1 Net Debt/Equity (x) 0.73 0.59 0.40 0.38 0.29 EBIT/Interest (x) 3.0 3.9 4.7 8.8 11.1
Margin (%)
Year-ended March 31 FY14
FY15
FY16 FY17e FY18e
EBITDA Margin(%) 27.2 26.2 20.2 21.9 20.7
EBIT Margin(%) 17.8 18.6 15.7 18.2 17.3
PAT Margin(%) 12.5 13.4 10.6 14.2 13.6
Antique Stock Broking Limited
20th Floor, A Wing, Naman Midtown
Senapati Bapat Marg, Elphinstone (West)
Mumbai 400013
Tel. : +91 22 4031 3444
•Fax : +91 22 4031 3445
www.antiquelimited.com
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