Techno electric engg ltd

Stock Opportunities
21

A slightly dated, but a comprehensive report on Techno Electric. Fairly impressive.

http://www.techno.co.in/Content/InvPresentation/Elara%20Initial%20Report%20-%2009.09.11.pdf

Between, this Elara Securities reports are fairly good. I couldn’t find more reports from these guys from Myiris, but in general, read a couple of them. Very detailed on the industry and the companies in that industry.

1 Like
22

kiran,

The company website provides a collection of all the brokerage research reports. No dearth of info on techno electric engg. in case any one takes the pains to research the company. Personally I have been fascinated by the path taken by the management in steering the company.

Currently I think we might be too early into the stock. I wont be surprised if this were to be one of the market darlings in next 6-12 months.

23

Hi Hitesh bhai,

Took a bit of time in replying back as I was reading the annual report and other details related to the company. Indeed the co has been impressive. The presentation of the annual report, investor updates has been fantastic and this does seem to be an excellent co.

They have intentionally become very selective in the EPC business and very rightly so. They seem to be choosy on the work they take and have been trying to move up the value chain. They also talk about taking up complex projects of higher capacities to get better margins.

The surprising thing is that they are making good money in the wind power segment…when the majority has done poorly. If the nos are right then it is a very interesting stock for a longer term perspective.

Regards,

Ayush

PS: Have bot some recently

1 Like
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The key positives which adds revenue visibility are :

  • Addressable market in Power generation to grow to Rs 45,000 Cr under 12th 5 yr plan. Techno has the expertise ( in terms of EPC player) to address 17-20% of this spending. So this caters well to EPC order book going forward for next 5 years.

  • On the renewable energy front Techno is targeting 6X current capacity of 207 MW up to 1250 MW by FY17 by means of both Organic and Inorganic route.

  • The revenue mix has considerably changed in favor of wind energy, as the latter is high EBITDA generator, it augurs well on the profitability front.

  • The company gets high depreciation from wind power, hence even in periods of low profitability cash flows are robust.

However the key negatives are,

  • Reduction in EPC order book based on poorer order inflow / write down of low margin orders / delay in order execution from environmental clearences

  • The wind energy production is highly seasonal in nature, with PLF seeing wide fluctuation between quarters. It books about 70% revenue during April - October (peak wind season) followed by low productivity of 25-30% during November - March. The PLF varies from as high as 37% in Q2 to as low as 10% in Q4.

  • The working capital requirements have shot up over the past few quarters, and company is in a tight spot regarding working capital management.

  • There is serious evacuation problems pertaining to wind power capacity in Tamil Nadu.

Links:

http://www.thehindubusinessline.com/companies/article2939190.ece

http://www.thehindubusinessline.com/companies/article2500572.ece

25

The key positives which adds revenue visibility are :

  • Addressable market in Power generation to grow to Rs 45,000 Cr under 12th 5 yr plan. Techno has the expertise ( in terms of EPC player) to address 17-20% of this spending. So this caters well to EPC order book going forward for next 5 years.

  • On the renewable energy front Techno is targeting 6X current capacity of 207 MW up to 1250 MW by FY17 by means of both Organic and Inorganic route.

  • The revenue mix has considerably changed in favor of wind energy, as the latter is high EBITDA generator, it augurs well on the profitability front.

  • The company gets high depreciation from wind power, hence even in periods of low profitability cash flows are robust.

However the key negatives are,

  • Reduction in EPC order book based on poorer order inflow / write down of low margin orders / delay in order execution from environmental clearences

  • The wind energy production is highly seasonal in nature, with PLF seeing wide fluctuation between quarters. It books about 70% revenue during April - October (peak wind season) followed by low productivity of 25-30% during November - March. The PLF varies from as high as 37% in Q2 to as low as 10% in Q4.

  • The working capital requirements have shot up over the past few quarters, and company is in a tight spot regarding working capital management.

  • There is serious evacuation problems pertaining to wind power capacity in Tamil Nadu.

Links:

http://www.thehindubusinessline.com/companies/article2939190.ece

http://www.thehindubusinessline.com/companies/article2500572.ece

26

Look at this name. Mytrah is the largest wind farm operator in India with 320 MW capacity with plans to ramp up to 1000 MW levels. Www.mytrah.com is pure play operator as viz techno which gives one exposure to volatile contracting business. Mailed you the research

27

Look at this name. Mytrah is the largest wind farm operator in India with 320 MW capacity with plans to ramp up to 1000 MW levels. Www.mytrah.com is pure play operator as viz techno which gives one exposure to volatile contracting business. Mailed you the research

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Look at this name. Mytrah is the largest wind farm operator in India with 320 MW capacity with plans to ramp up to 1000 MW levels. Www.mytrah.com is pure play operator as viz techno which gives one exposure to volatile contracting business. Mailed you the research

29

Techno Electric q2 fy 13 results out. Again as expected the renewable energy (read wind energy here) remains the show stealer.

Some excerpts from press release of results.

Q2FY13 vs. Q2FY12 (Consolidated)

ï* Total Income from Operations at Rs 204.45 crore vs. Rs 242.16 crore; down

15.57 %

ï* EBIDTA at Rs. 92.96 crore vs. Rs. 84.82 crore; an increase of 9.6 %

ï* EBIDTA margin at 45.47% vs. 35.03% in Q2FY12

ï* PAT at Rs 68.15 crore against Rs 58.19 crore; up 17.11%

H1FY13 vs. H1FY12 (Consolidated)

ï* Total Income from Operations at Rs 398.13 crore vs. Rs 431.88 crore; down

7.81%

ï* EBIDTA at Rs. 169.37 crore vs. Rs. 137.9 crore; an increase of 22.81%

ï* EBIDTA margin at 42.54% vs. 31.93% in H1FY12

ï* PAT at Rs 108.84 crore against Rs 91.01 crore; up 19.59%

half yearly eps of 19.

debt at sep 12 – long term 447 crores plus short term 239 crores – total debt 686 crores as compared to 560 crores in sep 11.

Coming to segmental results details, the energy division contributed 102 crores of ebidta for first half ending sep 12 as compared to 58 crores for first half ending sep 11

The epc division sales has been going down and was at 260 crores as compared to 350 crores whereas ebidta from this division was 36 crores as compared to 56 crores. But this seems to be a conscious decision of management not to focus too much on low margin contracts and stay away from the rate race.

The basic theme of investing is of a company aiming to be a force in wind energy and that is playing out quite well. All that needs to be monitored is the performance of EPC division as once it picks up the company can start firing on all cylinders.

30

Hi Hiteshbhai,

Somehow I feel the results are not good considering the expectations we were having of the growth from the wind power segment. In the presentation, the co had indicated about a major growth from this segment and as growth hasn’t come up in this qtr and next 2 qtrs are not good for this business, I think the this year will remain lackluster. Plus there is pressure due to increasing debtors and debts.

I do agree on the long term opportunity and the quality of mgmt.

Look forward to your views.

Ayush

31

Ayush,

Coming to segmental results for techno given along with the results by the company,

following are the details for** the energy segment only (taken from consolidated figures)**

period q2 fy 13 q2 fy 11 q1 fy 13 h1 fy 13 h1 fy 12

sales 79 54 68 137 82

profit 61 40 41 102 58

I think above results are quite encouraging if one were to consider only the energy (read wind energy) segment for the quarter and half year ended sep 12.

As you say the second half is not going to get much contribution from the energy segment. But the transmission and the EPC segment will contribute somewhat to the numbers for second half.

My basic theme in investing in techno electric is about investing in a company which is likely to be a company which aims to build up wind energy assets which are generating good amount of profits plus EPC business which has in the past generated a fair amount of cash for the company and which is likely to do so in the future also.

Overall I think results are fairly encouraging for the quarter. the only thing that needs picking up is the EPC business and if that happens this could really fly.

There was an anand rathi report of oct 12 which mentioned company is trying for financial closure of funds to acquire another 150 MW of wind energy assets.

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in the above data, pl consider the second column as q2 fy 12 (instead of q2 fy 11 written erroneously).

33

Hitesh Bhai,

There was an article about renewable energy in business world Nov 11 issue.

It mentions that the majoruncertainty facing wind-power is the 50 paisa per unit incentives given being reviewed by the govt currently. Yes, we might conclude that with the major power issues plaguing India govt may not do something which affects the producers.

Secondly the report mentions that for wind energy to scaleup the infrastructure to handle the high variations should be in place in terms of bettertransmissionlines and substations. With the cash-strapped SEBs not taking interest this might take time.

We already have enjoyed a good 20% upside but are we still too early in this?

Cheers

Vinod

34

Thanks for posting the segment results, Hitesh bhai. As the page which was uploaded by the co was not very clear, I had missed looking at the segment results.

I have almost exited from the stock for now will take a re-entry after sometime or correction.

Ayush

35

majoruncertainty bettertransmissionlines

vinod,

these articles will keep on mentioning such things off and on. What we need to do is look at the bigger picture.

And that is that production costs for energy by conventional methods is increasing gradually and hence at some stage wind energy will be a fancied sector bcos there are no input costs in wind energy except putting up windmills.

And here the early movers with sufficient expertise will have larger benefits.

And yes I think we are quite early into the stock at present so we need to be patient. I am holding on to my positions as my exposure is not too large in percentage terms.

36

As Hiteshji mentions, we might be too early in the stock. But the given the doldrums the EPC business is in and looking at Oct-Mar period, where wind energy is operated at much lower pick load factors (PLF) I decided to book profits. [Entry: 180, Exit: 211]

The renewable energy story holds enough promise and we might get lower entry points to enter into this in the future.

37

Hi,

Thank you Rudra and Hitesh Bhai.

Makes sense, I’ll book partial profits (entered at Rs 171) and bring down the allocation to 2%.

Meanwhile pls have a look at the Mazda thread. I think it holds great potential.

Cheers

Vinod

38

Key highlights-By Capital Market

  • EPC segment has an order book of about Rs 850 crore as on Sep’12 compared to about Rs 900 crore for June’12. During the quarter, the company received orders worth Rs 82 crore. The company post Sep’12 has received another order from Uganda of about Rs 85 crore.
  • Overall, management expects to end the year with flat note on EPC business as compared to about 10-15% growth of sales guided earlier. Management expects the margins to remain steady around this level.
  • The company has current wind capacity of about 207 MW and generated about 204.45 M units of wind power during Q2 FY’13.
  • Debtor’s days continue to remain worry for the company. Receivables from Tamil Nadu SEB remain around 10-12 months. However, with tariffs being revised, management expects the receivable days from TNSEB to come down to around 6 months by Mar’13. Management does not expect any bad debts from any of its receivables.
  • There is a forex gain of about Rs 7 crore during the quarter as compared to about Rs 3.5 crore of forex loss during the corresponding previous quarter.
  • Company has an accumulated REC of about 1.95 lakh as on Sep’12 and will sell them in Q4 FY’13. Current REC rates are not that attractive. During FY’12, REC was realized at average rate of about Rs 2.6 per unit, however, management says that it is difficult to get that same rate in FY’13 as of now.
  • Management is looking for private equity partner for its wind power capacity expansion
39

I read following news in DNA. I am not sure if it has impact on price in short term.

http://epaper.dnaindia.com/epapermain.aspx?pgNo=14&edcode=820009&eddate=2012-11-20

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Another news on Techno Electric