Techno electric engg ltd

Stock Opportunities
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TechnoElectricannounces FY12a13 Financial Results

Editor Synopsis

FY13 vs. FY12 Consolidated

Total Income from Operations at Rs 700.13 crore vs. Rs 819.86; down by 14.6 %

EBIDTA at Rs. 234.68 crorevs. Rs. 224.3 crore; an iincrease of 4.63%

EBIDTA margin at 33.52% vs. 27.36% inFY12

PATat Rs 120.35 crore against Rs 120.89 crore;

PATmargin at 16.7% vs. 14.35% in FY 12

SimranWind Project Pvt Ltd (subsidiary)

Total Income from Operations at Rs 148.65 crore vs. Rs 87.66 crore ; up by69.58 %

EBIDTA at Rs. 142.16 crorevs. Rs 83.48crore; an increase of 70.3%

EBIDTA margin at 95.63% vs. 95.22% inFY12

PATat Rs 61.84crore against Rs 28.95 crore;

PATmargin at 41.36% vs. 31.87% in FY12

The Board recommended a dividend of Rs 3 per equityshare.

Commenting on the results, P P Gupta, managing director,TEECL, said, “We closed another year with modest performance. Power sector in India has been sluggish overall which is visible in our results as well, but we believe in bottom line and not just the top line, therefore even though our top line has decreased our bottomline has remained unchanged while our profit margin has increased on consolidated basis. The power sector scenario seems to be recovering from its lows and an uptick in orders is visible since the past couple of months.”

“This positive change in the industry has led us to successfully book orders to the tune of Rs 320 crore during the quarter with cumulative unexecuted order book position of more than Rs 1000 crore at the end of the year. We shall continue to grow sustainably in EPC and expand ourgreen energyportfolio in the coming financial year,” added P P Gupta.

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Excerpts from Q4 FY '13 concall:

Inventory of 105k RECs this year. According to new rule, companies are allowed to sell RECs withing a time frame of 2 years.

Receivables from TNEB reduced to 5-6 months from 11-12 months.

Outlook for EPC business is positive. Order book was around 1000 cr. at Mar '13 as compared to 950 cr. at Mar '12, out of which 500 cr. is L1. They have received many more orders in last 2 months. Expect EPC topline around 20-25% more than 515 cr. last year. PAT margin was 10% last year compared to 15-16% enjoyed earlier. We can expect marginal improvement in short term. This is becuase majority of order book if from PGCIL and NTPC, only 5% is from industrial segment - whereas industrials have higher margin. Company should return to previous PAT rates (EPC) by FY '15, '16.

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Conference Call by Capital Market

Order intake in FY13 stood at Rs 569 crore and the company is L1 for orders worth Rs 500 crore. Of the L1 orders the company got one order from NTPC post March 31, 2013. The order book as end of March 31, 2013 is Rs 1000 crore compared to order book as end of March 31, 2012 at Rs 950 crore. The order book is pre-dominantly of PGCIL and NTPC orders. The share of industrial orders of the total order backlog is 5%, that of Transmission Line is 60% and that of power generation was 35%.

REC trading in FY13 was largely on floor price and the company's sales also are on floor price only. The company started with an REC inventory of 6500 and accumulated 257187 during the year and sold about 150288 REC during the year. Thus the closing inventory of REC is 105000 as of March 31, 2013. Company's REC inventory is all of 3-4 months old only and the company has a time limit of 2 years to sell it off. But the company will not wait till expiry time of 2 years but hope to sell it well within one year.

TNEB Outstanding: As end of March 31, 2013 the outstanding was about Rs 90 crore but that has come down to about Rs 45 crore as of today. The payments are coming very fast. Earlier the payments are delayed for 11-12 months but that has now come down to 5-6 months.

The company expects the EPC revenue to grow by 22-25% in FY14 and the company expects the margin to be around 10-11%.

Last year the execution was slow and the margin had a drag of fixed overhead spread on lower STO, but with 22-25% sales growth in FY14 the margin will be better than FY13. The EPC market has improved is last few months and the competition has reduced. Especially the bad competition has gone off. The company expects the quality of the orders will improve in medium term at-least one year's time.

Revenue of entire group from wind power generation as % to total sales increased to 26.31%. The sales of Group's wind power generation were up 59% to Rs 184.25 crore up from Rs 115.82 crore in FY12.

Sales of Simran Wind stood higher by 69.85% to Rs 148.65 crore (up from Rs 87.66 crore) with benefit of new 111.9 MW capacity captured for full year. The EBITDA for the quarter stood higher by 70.3% to Rs 142 crore as the EBITDA margin marginally expanded to 95.60% compared to 95.22% in the corresponding previous period. PAT stood at Rs 61.84 as against Rs 28.94 crore in the corresponding previous period.

Consolidated debt was 627 crore and of which about Rs 417 is of Simran Wind and that of Techno Electric (standalone) is Rs 210 crore. Of the loan book of Simran has ECT of USD 55 million. That of Techno Electric standalone the debt of RS 210 crore comprise of term loan of Rs 100 crore and that of STL of Rs 110 crore (including foreign currency loan of Rs 58 crore).

Targets to add another 100 MW in FY14 and the company is in negotiation with various WTG manufacturers
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the scrip is falling with no obvious trigger - any update that i am missing here?

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The stock is down to 75, which is 3.6x Earnings, 0.55 Book, and yields 4% div.

The last few days have seen a freefall. No company specific news I came across would support this fall, though it seems the fundraising is likely to get delayed:

http://www.ivcpost.com/articles/12671/20130730/indias-techno-electric-looks-private-equity-frims-funds.htm

I am itching to buy more, but haven’t seen many cycles in the market. What does experience of veterans say ? Is it better to stay away till the broader market finds a bottom? Techno has been down 60% in the last 7 months v/s 30% for BSE Small Cap.

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chintan,

usually markets are much more smart than we expect them to be… So if a stock falls so much one has to try to understand that something is really really wrong…

In the rare case where markets are wrong, and still you buy with strong conviction, you end up with multibaggers.

hitesh.

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Hiteshbhai,

Thanks for the insight. It’s always helpful. I think you are right - there must be something wrong. Which leads to the difficult question. What could be the reason behind the fall ? Are markets not fancying companies where fresh capital needs to be deployed (Wind Farm), or not counting on EPC margin and turnover improvement ?

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The company is supposed to be decent with competent management. While the market is the master, I do believe it can be wrong at times (I am not a believer in the efficient market hypothesis) and this is where as Hitesh pointed out, opportunities exist. There are times when an institutional investor is forced to exit certain position purely on technical reasons such as redemption pressure or the market cap falling below certain threshold level that is acceptable. There are times institutional investors actually wait for a stock to go up as they cannot buy if the mcap is below say $500 mn or $100 mn whatever their internal norm is…which is why you might see frenzied buying in a stock which is already up or selling in a stock which is already down. If you are from financial services industry you would be aware of the same, however this is for the benefit of those who might not be familiar with the psyche of a institutional investor.

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Thanks Satish,

For giving the institutional investor perspective.

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Hitesh bhai,

Have you stopped tracking techno electric?

No updates from you on this subject

Regards

Amey

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Q1FY14 results are out:

PAT: 27.98 cr v/s 40.69 cr in Q1FY13.

TTM EPS: 18.85

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yes …checked them on screener

it was expected that 2013-14 would be a bad year for Techno … it remains to be seen as to how much this rough patch will extend

timely execution of EPC contracts remains the key … otherwise the working capital in such companies starts getting on the top of eveything else.

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yes amey stopped tracking it closely… I think when the whole sector is in the dumps its difficult for an isolated company to do well… It often does happen that you will find a lotus in the pond but for me the percentages of getting things right seem to be too low…

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ok Hitesh bhai,

thanks for replying

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For Transmission System for Patran 400 KV, Techno Electric & Engineering Company Limited has emerged as the successful bidder

http://economictimes.indiatimes.com/news/news-by-industry/energy/power/sterlite-grid-bags-2-power-transmission-contracts/articleshow/22805042.cms

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Interim dividend of Rs 2.5 declared.

Q3 results are out.

Consolidated results:

Q3 FY14 PAT 34.82 cr v/s Q3 FY13 PAT 25.36 cr.

9M FY14 PAT 101.31 cr v/s 9M FY13 PAT 136.4 cr.

This quarter, the profit for EPC is down ~10%; for Power, down ~50%; and for Corporate, up ~500%.

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Company was rep by Ankit Saraiya, Director and Pradeep Kumar Lohia, Director Finance.Key takeaways of the conference call by Capital Mkt;

Order backlog as end of June 2014 stood at Rs 1350 crore with order inflow in Q1FY15 being Rs 325 crore. The company has put-in bids for orders worth Rs 1500 crore. Orders in the book as well as in pipeline are largely of transmission EPC orders largely from SEBs and PGCIL.EPC operating margin was about 11%. However with contribution from newly bagged orders flowing from Q3FY15 the margin profile of EPC will improve.

Consolidated debt is Rs 607 crore and the standalone debt is Rs 161 crore (including NCD of Rs 100 crore). The debt at Simran Wind stood at Rs 446 crore. Debt repayment scheduled in next 2 years is Rs 140 crore. The co both parent and wind subsidiary generates enough cash for debt servicing.Consolidated cash on hand is Rs 130 crore as of now.BOT Projects - Patran Transmission Project is a 400kv GIS substation project and it doesnot involve much of line work. The company has achieved financial closure for the project and land acquisition is underway. The project expected CoD is May 2016. The cost of the project is Rs 200 crore.

For next 2 fiscal the company to enhance focus on transmission BOT projects especially that of line works i.e. substations. The company has strong capabilities in substation projects. The company expects PFC to call for bids for some transmission projects soon. Thus the company expects to bag at least one BOT project this fiscal and to best two projects.

Wind â Q1FY15 the business is hurt by multiple issues largely evacuation issues and low wind. However from July 2014 onwards the evacuation situation in TN improved. Empirically if the wind is at average level the wind period will be longer and last upto Oct-Dec quarter. REC inventory of the company as end of June 2014 is 210000 and the company is expected to generate about 2 lakh REC during this fiscal and expected to sell about 1.5 lakh RECs during this fiscal. The company expects the demand for RECs to improve as some of state electricity regulatory commissions start enforcing RPOs. Total outstanding has come down to about RS 24.5 core or receivables days are now at about 6 months compared to over 1 year earlier.

The company expects the evacuation issues to get resolved by end of this fiscal or early next fiscal. Thus the next fiscal will be good for the wind business. EPC business given its strong order book as well pipeline orders to see strong growth going forward.

Or the order book, the company has comfortable margin of about 13% in case of orders worth Rs 600 crore and balance are bagged at competitive rates. The margin for orders bagged before 5 months are of little lower margin and now the new orders are coming with better margins.

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**Company was represented by P P Gupta, MD and Ankit Saraiya, Director.Key takeaways of the conference call by Capital Mkt;
Order book currently stands at Rs 1900 crore.**The order intake in H1FY15 was Rs 800 crore. The company expects an order intake of Rs 1500 crore for FY15 as a whole.
For FY2014-15 the company expects a revenue of about Rs 800 crore plus. Of the total FY15 revenue about Rs 700 crore will be from EPC business and about Rs 125 crore from Wind. The company expects a EPS of over Rs 20.
Number of players vying for orders have now come down in domestic market. The bids are now sensible as well.Margin pressure though not worsening, there is no significant improvement in margin as well.Barring one order of Rs 100 crore worth frim Mitsubishi Chemicals balance of the order book are utility orders.In the next 2 years the company expects at-least 25% of the order book to be of international orders. The company is working in that front.
Wind: Payment outstanding from TNEB as end of Sep 2014 was Rs 60 crore and that as on today stand reduced to Rs 52 crore. The company expects all outstanding dues will be collected by Dec 2014 end. REC Inventory as end of Sep 2014 was 230000.
Strong margin in Q2FY15 is largely on account of execution of Uganda order and better cost management. This facilitated better profitability. Higher contribution from export orders as well as cost pruning and better working capital management will boost profitability going forward in current fiscal.
Opportunities are there with growth cycle visible. The company see projects up for tender in states such as UP, Rajasthan, Bihar and Telengana. The company has already bagged on project worth Rs 145 crore in Rajasthan and is L1 in one more project worth Rs 105 crore in UP. The company sees orders addressable by the company worth Rs 10000 crore to get finalized by Sep 2015 and of which the company will corner at least 10% without any difficulty.
There are about 12 BOT project are under various stages of tendering. Of which one will of interest to the company fitting to its criteria of not exceeding Rs 500 crore in size and substation component of about 30-40% in total order value. In orders under pipeline the company is in interest for 2 more projects.The company expects BOT orders of Rs 25000 crore this fiscal and of which 6 projects worth Rs 10000 crore already happened.

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Co rep by P P Gupta, MD & Ankit Saraiya, Director. Key takeaways by Capital Mkt

Order book as end of Dec 2014 stood at Rs 1750 crore.

The company currently has wind assets worth 208 MW with 192 MW in TN and 18 MW in Karnataka. The company is currently faced with evacuation issues in TN even though there is zero issues in Karnataka. The company propose to completely exit Wind power generation business and it won’t make any further investment in power generation. All it want to be in transmission and distribution segment.

Old assets will be the one that will be sold first and sale of new assets will take time. The company’s first acquisitions were from Suzlon of about 45 MW & 50 MW which concluded simultaneously at a cost of about Rs 450 crore. The company will exit at acquisition value.

Consolidated cash on hand is Rs 125 crore and debt is Rs 550 crore as end of Dec 2014.

Work in progress is Rs 47 crore and this is in reference to the unsold area of 70000 sft in the commercial property at Mumbai. There are active enquiries and the company expected to close the deal before FY16.

Outstanding from TNEB is about Rs 35 crore. The dues upto Aug 2014 were already paid and the peak period outstanding will normally get paid before March. So by end of this fiscal the outstanding will not be more than Rs 7-10 crore.

Worst is over for the sector and the company is well placed to capture the upswing.

The company is yet to take a call on the proceeds from sale of wind power assets. Dividend is a good option but there are also opportunities in opening up of distribution sector.

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Disc - I am holding this co.

@hemant,

Why do you think will the sector see any upside? According to me one reason could be that after Obama visit, renewable energy sector could see fresh investments.

What others?