Techno Electric & Engineering Company Limited · NSE:TECHNOE
Techno Electric & Engineering — 2015 05 19 HDFC Securities
17 slides from Techno Electric & Engineering's investor presentation, May 19, 2015
Slide 1: Techno Electric & Engineering Co.
VISIT NOTE 19 MAY 2015 Techno Electric & Engineering Co. NOT RATED INDUSTRY CAPITAL GOODS Best in class CMP (as on 19 May 2015) Rs 425 Techno Electric and Engineering Company (TEEC) is Wind business: TEEC acquired 95MW of wind capacity amongst India’s premier T&D substation EPC from Suzlon in FY10
Slide 2: Company Overview
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE Company Overview Techno Electric is a leading provider of engineering, procurement and Techno Electric and Engineetring construction (EPC) services Company Limited (TEEC) to the power transmission sector with an expertise in substation EPC EPC Wind Tran
Slide 3: EPC business : Star performer
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE EPC business : Star performer High capability, strong opportunity TEEC provides EPC solutions to all the three segments EPC Order Book (Rs 18bn) break up TEEC is amongst the most in the power sector, viz. generation, transmission and Generation Transm
Slide 4: PGCIL investment approvals have picked up
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE We expect power T&D capex to remain strong in Further, SEB’s (State Transcos) have ambitious plans India given that it has historically lagged generation to improve their T&D infrastructure. FRP (financial PGCIL investment approvals capex (0.6x), wh
Slide 5: PGCIL substation orders & TEEC's share
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE PGCIL substation orders & TEEC’s share EPC book to bill ratio Substation orders from Substation orders TEEC Share Order book Revenue Book to bill PGCIL have picked up and Rs bn Rs bn Rs bn 40 3.5 25,000 x 3.5 we expect TEEC to continue 35 3.0 3.0 its or
Slide 6: TEEC has one of the best operating metrics
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE Net Working Capital/Sales – Among the best Revenue/Gross block – Fixed asset light TEEC has one of the best Kalpataru Power KEC International Kalpataru Power KEC International operating metrics amongst KNR Construction Techno Electric KNR Construction T
Slide 7: Wind business : Core, no more!
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE Wind business : Core, no more! TEEC ventured into wind asset ownership in 2010 TN has been investing to augment its evacuation TEEC ventured into wind with the acquisition of 95MW of wind farms. The network, which could lead to an increase in PLF. ene
Slide 8: Impact of sale of wind assets
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE Impact of sale of wind assets Wind portfolio has TEEC recently sold off 44.45MW of Simran’s wind As evident from the table below, the company would assets for a consideration of Rs 2.2bn. Given that the achieve an avg. ROCE of ~17% ex-wind over FY15
Slide 9: Transmission assets : Opportunistic use of excess cash
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE Transmission assets : Opportunistic use of excess cash TEEC’s niche is in TEEC has undertaken two transmission BOOM The experience with private sector has been mixed so substations and hence it projects. One of them (Jhajjar) is operational while fa
Slide 10: Financial forecasts and valuation
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE Financial forecasts and valuation We expect order inflows to KEY ESTIMATES remain strong over FY15-17 Rs mn FY11 FY12 FY13 FY14 FY15E FY16E FY17E given capex plans of PGCIL and EPC State Transcos Order inflow 7,988 2,540 5,659 7,705 14,000 13,500 15,500
Slide 11: Valuation SOTP
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE VALUATION SOTP Business Parameter Multiple Value (Rs mn) Value/sh We value the EPC business at EPC EV/EBITDA 10 19,696 345 10x EV/EBIDTA, which is at a Wind energy EV/MW 55 8,940 157 premium to other EPC players Transmission projects NPV 1,642 29 but is
Slide 12: Annexure
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE Annexure KEY INCENTIVES TO PROMOTE WIND ENERGY Regulation Explanation Impact Accelerated Depreciation Depreciate 80% of the wind asset in the first year of Provide tax savings for Wind Energy developers in the (AD) installation in books of account initi
Slide 13: REC mechanism
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE REC mechanism REC (Renewable energy certificates) is a mechanism in theory lead to penalties being imposed on wherein states which are wind deficient can fulfill obligated entities. their renewable purchase obligations (RPO) by buying REC mechanism
Slide 14: Income Statement and Balance Sheet
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE INCOME STATEMENT BALANCE SHEET (Rs mn) FY13 FY14 FY15E FY16E FY17E (Rs mn) FY13 FY14 FY15E FY16E FY17E Revenue 7,001 7,085 7,467 10,202 12,447 SOURCES OF FUNDS Growth % (14.6) 1.2 5.4 36.6 22.0 Share Capital 114 114 114 114 114 Raw material expenses 3,7
Slide 15: Cash Flow Statement and Key Ratios
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE CASH FLOW STATEMENT KEY RATIOS (Rs mn) FY13 FY14 FY15E FY16E FY17E FY13 FY14 FY15E FY16E FY17E PAT from operations 1,011 746 806 964 1,332 PROFITABILITY (%) Interest 522 454 482 394 474 GPM 46.5 39.9 41.2 35.5 36.0 Depreciation 655 667 674 618 656 EBITD
Slide 16: Rating Definitions and Disclosure
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected t
Slide 17: HDFC securities Institutional Equities
TECHNO ELECTRIC & ENGINEERING CO. : VISIT NOTE HDFC securities Institutional Equities Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013 Board : +91-22-6171 7330 www.hdfcsec.com Page | 17
Techno Electric & Engineering Company — 2015 05 19 HDFC Securities on 6ix