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Power equipment manufacturers which have seen a prolonged slowdown since the past few quarters seem to be on the radar of institutional investors with signs of recovery in industrial capex cycle. While foreign institutional investors have upped their stake in most of them domestic institutional investors are not lagging.
Recent earnings in April-June 2015 indicate that some of them are indeed well on track amid order inflows (both domestic and overseas) and are commissioning power projects for various utilities while some are taking initiatives to control costs at all stages of manufacture.
"Although there are no significant changes visible on the ground level but given the government initiatives to put investment cycle on track institutional investors seem to be focussing on cyclicals", said an analyst at a prominent domestic brokerage.
BHEL signed three strategic MoUs in Kazakhstan for construction of power plants and CHP (combined heat and power plants). The company has also commissioned Sudan's largest thermal power plant besides commissioning power units at several locations in India. Interestingly, in early June, the state-owned engineering major achieved a new land mark by securing the highest ever single contract to set up 4,000MW supercritical thermal power plant for Telangana State Power Generation Company valued at Rs 17,950 crore. The company will announce its April-June earnings on Friday. "The
stock has been in a long consolidation phase between Rs 220-270," said Kunal Sheth, analyst at Prabhudas Lilladher adding that investors can hold at current levels.
Larsen & Toubro successfully commissioned India’s first nuclear 700 MWe steam generator for Kakrapar nuclear power plant of Nuclear Power Corporation of India Limited in Gujarat. The company's construction division which releases orders on a monthly basis indicate receipt of various orders to build and commission power plants. Further, the engineering and construction major's huge order book at Rs 2,38,973 crore indicates healthy revenue visibility. Consolidated revenues for the
April-June quarter was Rs 20,252 crore while net profit was down 37% at Rs 606 crore because of sharp decline in profits of metallurgical, material handling and heavy engineering segments. Brokerage Prabhudas Lilladher has a 'buy' call on the stock with a target of Rs 2,000.
Siemens secured an order from Power Grid Company of Bangladesh and an order to supply high voltage circuit breakers from Algeria. The company also won a order to supply gas insulated switchgear for a substation project of Himachal Pradesh Power Transmission Corporation. Net profit for the third quarter ended June 2015 surged 13 fold to Rs 168 crore as against Rs 13 crore in the same quarter last year because of cost rationalisation process and lower raw material costs. Sheth said it is one of the best stocks amid recovery in industrial capex with an "accumulate" rating with a target of Rs 1,550.
ABB India has also won orders from Power Grid Corporation for the extenstion of three substations in the state of Gujarat and the company has also expressed interest to support power infrastructure development in Punjab. The company has also bagged a large order from Bangladesh. The company in a conference call said that it was able to deliver growth in the top-line and continued focus on improvement in operational efficiency and product competitiveness, has also resulted improvement in profitability. Net profit for April-June was up 20% at Rs 57.5 crore compared with Rs 47.7 crore in the same quarter last fiscal.
Although April-June quarter results remain muted for Alstom T&D India and Alstom recent order wins for power-related equipment such as switchgears and transformers from power utilities have raised hopes of improvement in earnings going forward. Foreign institutional investors have raised their stake in Alstom T&D India to 1.81% in June quarter compared to 1.55% in the March quarter. In case of Alstom FII stake is up at 2.3% in June quarter compared with 1.96% in the previous
quarter.
