Beruflich Dokumente
Kultur Dokumente
Unrelenting competition
Competition continues to stay strong but with a diminishing intensity. Chinese/Korean players continue to remain aggressive in product based categories of insulator, transformer and reactor segments, seizing 68.3%, 54.3% and 92.1% of the respective total share in FYTD13. Competition from other international players (ex-Chinese/Korean) remains concentrated in technology intensive segments like HVDC. For projects involving EPC work, domestic competition remains high, with the number of bidders increasing across segments. The conductors segment witnessed the number of vendors rising from eight in FY08 to 17 in FY12, substation from two to 23, tower from 10 to 23 and transformers from six to 11 over the same period. After eating more than one can digest, many smaller domestic players have shielded away from bidding this year, leading to better margin realisation for others.
Peer Index
Source : Company, ICICIdirect.com Research This Peer Index is an equal weighted index of prices of four companies: KEC International, Jyoti Structures, Kalpataru Power and Crompton Greaves
IPPs
5 0
KEC
KPP
JYS
CRG
Analysts name
Chirag Shah shah.chirag@icicisecurities.com
Source: Company, ICICIdirect.com Research For numbers in the boxes outlined in blue, corresponding to the financial years represent the total number of bidders across segments; highlighting the contracting P/E multiples with intensifying competition. Also, they are indicative in nature and not proportionately scaled
Capex intensity to continue PGCIL has been maintaining a strong capex pipeline, which is poised to carry on into the Twelfth FYP. PGCIL capex had grown at a CAGR of 18.2% over FY09-12 and is expected to sustain at an annual rate of | 20,000 crore till FY17. This would serve enough to fill the stomach, provided bidding remains rational. For the five months into FY13, PGCIL has already tendered orders worth | 6776.5 crore/33.9% of annual target/217% increase on a YoY basis.
Exhibit 2: PGCIL ordering trend
(| Crore) Total Ordering Of which, share of Indian Chinese/Korean Other International FY09 14,222.1 13344.7 or 93.8 % 606 or 4.3 % 271.4 or 1.9 % FY10 12,068.5 9343.5 or 77.4 % 1872.7 or 15.5 % 852.3 or 7.1 % FY11 17,701.5 11392.4 or 64.4 % 638.9 or 3.6 % 5670.2 or 32 % FY12 23,463.3 20673 or 88.1 % 2472.9 or 10.5 % 317.4 or 1.4 % FY13 (Till Date) 6,776.5 2797.4 or 41.3 % 1157 or 17.1 % 2822.1 or 41.6 %
The historical trend suggests that on average PGCIL orders between 18% and 28% (FY09-H1FY13) of its annual ordering target in H1 of any fiscal, thereby making the overall process highly back ended. Even in H1FY13, PGCIL did 34% of the overall ordering (includes one big order of HVDC system)
Players
Competition remains unabated, though the intensity is gradually declining. Newer domestic entrants, who went berserk with their bids in the previous fiscals, have started sobering up. For instance, the number of successful bidders had shot up from eight in FY08 to 17 in FY12 in the conductors segment whereas the number of successful vendors shot up from two in FY08 to 18 in FY12 in the substation segment. Chinese/Korean players remain competitive in product based areas like transformers, reactors and insulators and their market share aggregated 10.5% in FY12 and 17.1% in FYTD13 of the total pie. Technology intensive segments (like HVDC) remain strongholds of players like ABB and Alstom, where domestic players are yet to match the capabilities and, thereby, lack pre-qualifications.
Page 2
More than 70% of the orders (by value) are tendered out in the third and fourth quarter of the year; with fourth quarter being the busiest quarter at PGCIL
Page 3
Transmission
Transmission line
Substation
Tower package
Conductors
Insulators
Transformer
Substation package
Others
Tower packages constitute the maximum weightage in total ordering, cornering nearly 31.0% in FY09 to 37.8% in FY12. The conductor and substation packages follow suit with 26.3% and 17.3% in FY09 to 22.5% and 14.5% in FY12, respectively.
In the transmission sector, the transmission line segment makes up 65% of the total investment while the substation segment makes up the rest
After from tower, conductor and substation packages, all the other segments command mid single digit allocations.
HCPTC/HCDC orders tend to be bulky in nature, with two orders been tendered till date. The first one, valued at | 5325 crore was tendered in March 2011 to ABB (parent) while the second one in June 2012, worth | 2495 crore was to Alstom
Page 4
Tower packages had shown a steady growth in capex from PGCIL, thereby providing ample opportunities for players like JYS, KEC and KPP. Further, on the back of an enhanced overall capital outlay, all segments had witnessed considerable growth rates Also, growth rates for segments across the board appear elevated in FY12 due to the low base affect of FY11. In FY11, tenders totalling | 17,701.5 crore were finalised of which a single HCPTC/HCDC order valued at | 5325 crore was tendered, leaving | 12376 crore pie for all other segments
Exhibit 10: Market share of India/Chinese-Korean/ and other international players across segments over FY09-13 (till date)
(in %) Insulator Package Substation package Transformer Package Tower Package Conductor Package Transmission line package Reactor Package HVDC Miscellaneous Cable Package Civil Construction Rural electrification Others FY09 64.5 | 22.5 | 13 91.1 | 0 | 8.9 51.3 | 48.7 | 0 100 | 0 | 0 100 | 0 | 0 100 | 0 | 0 100 | 0 | 0 100 | 0 | 0 100 | 0 | 0 FY10 40.1 | 58.6 | 1.4 69.3 | 7.7 | 23 41.8 | 51.4 | 6.8 96.4 | 0 | 3.6 90.5 | 0 | 9.5 100 | 0 | 0 55.1 | 44.9 | 0 93.5 | 0 | 6.5 100 | 0 | 0 FY11 31.2 | 67.9 | 1 88.1 | 2.7 | 9.2 68.7 | 31.3 | 0 100 | 0 | 0 100 | 0 | 0 100 | 0 | 0 49 | 51 | 0 0 | 0 | 100 72.5 | 0 | 27.5 FY12 12.2 | 87.8 | 0 84 | 15.5 | 0.5 83.5 | 16.5 | 0 96.9 | 0 | 3.1 100 | 0 | 0 98.8 | 0 | 1.2 34.8 | 65.2 | 0 100 | 0 | 0 100 | 0 | 0 97.3 | 0 | 2.7 85.1 | 14.2 | 0.7 FY13 (Till Date) 31.7 | 68.3 | 0 41.8 | 58.2 | 0 45.7 | 54.3 | 0 84.4 | 0 | 15.6 80.2 | 0 | 19.8 100 | 0 | 0 7.9 | 92.1 | 0 0 | 0 | 100 100 | 0 | 0 100 | 0 | 0 0|0|0
The three figures in each cell represent the market share (in percent) of Indian players | Chinese/Korean players | and other international players in that particular category tendered out in that particular year. For example : If | 100 crore worth of insulator packages were tendered in FY09, Indian players won | 64.5 crore, Chinese/Korean players won | 22.5 crore and other international players won | 13 crore worth of orders out of the total pie of | 100 crore Category dominated by Indian players in that year Category dominated by Chinese/Korean players in that year Category dominated by Other International players in that year
Page 5
Exhibit 11: Key players operating in different segments in the transmission sector
Tower Packages Conductors Insultors Transformers Substation Substation Others KEC Intl * Kalpataru Power * Jyoti Structures * EMC * Gammon India * Tata Projects * L&T * Indo Projects* Aster Pvt Ltd * Shyama Power * EMCO * ICOMM Tele * Sterlite Technologies * Apar industries * Gammon India * Gupta Power Infrastructure * Smita Conductors * Deepak Cables * Vijai Electricals * Hindustan Vidyut Products * Diamond Power * Genus Power W S Industries * Nanjing Electric* Dongguan Gaoneng Electric * Zigong Sediver * Aditya Birla Insulators * Modern Insualtors * Jiangsu Xiangyuan Electric Equipment * SiChuan YiBin Global * BHEL Crompton Greaves * Siemens * Apar Industries * TBEA Shenyang Transformer* Alstom T&D * ABB * BHEL * Hyosung Corp * Transformers & Rectifiers India * Vijai Electrical * Baoding Tianwei Baobian Electric * EMCO L&T * Jyoti Structures * BHEL * EMC * KEC Intl * TBEA Shenyang Transformer * Siemens * Techno Electric & Engg. * Hyosung * ALSTOM T & D * New Northeast Electric Group * G.E.T Power * EMCO * ICSA * Bharat Bijlee TAG Corp * Apar Ind * ZTE Corp * LS Cables * Asbesco (India) * BGR * Universal Cables * Simplex Projects * EMI Ltd * Navyug Engineering * Transmission Line
23 17 18 15 10 5 12 9 9 7 2 9 8 6 10 11 6 10 17
23
20 15 10 5 0 8 15 11
15 10
Conductors
Towers
Page 6
Even though the overall order inflows of all players under over coverage have increased consistently over the years, their share in PGCIL tendering had fluctuated noticeably
In the respective segments, KEC and KPPs share in total orders fell from 13.4/13.3% in FY09 to a mere 1.6/4.6% in FY10, respectively. Similarly, JYS market share fell from 10.7% in FY10 to 1.5% in FY11. The same had gradually climbed back to comfortable levels post FY11, with competitive intensity reducing
Page 7
Exhibit 16: Share in tower packages of different players for FY11 and FY12
In the tower space, Tata Projects, JYS, KEC, KPP and EMC are the leading players. Recently, players like Gammon India have increased their focus in the segment, with its market share increasing from 6.8% in FY11 to 11.2% in FY12. JYS also made a noticeable comeback with nil share in FY11 to 8.5% in FY12
Tata Projects Ltd Electrical Manufacturing Company Kalptaru Power Transmission Jyoti Structures Gammon India L&T KEC International Ltd Others 0.0 5.0 10.0 (%) 15.0 0.0 6.8 7.2 6.9 9.0 10.8 8.5 8.5 11.2 10.3 13.3 13.4
18.1
20.3
FY11
FY12
Exhibit 17: Share in transmission line package of different players for FY11 and FY12
Kalptaru Power Transmission Jyoti Structures Gammon India L&T KEC International Ltd Others 0.0 10.0 0.0 0.0 0.0 0.0 0.0 13.9 20.0 30.0 (%) 40.0 50.0 20.3 60.8 60.0 70.0 24.9 25.5 FY11 FY12 15.5 39.2
Though Sterlite Technologies remains the undisputed market leader in the conductor segment, other players had been successful in cornering some of its market share. Players like Gupta Power Infrastructure, Gammon India and Apar Industries had substantially increased their market share in FY12 from FY11
Exhibit 18: Share in conductor of different players for FY11 and FY12
Deepak Cables Smita Conductors Gupta Power Infrastructure Sterlite Technologies Ltd Gammon India Apar Industries Others 0 5 10 15 20 (%) 3.4 8.6 8.6 15.8 20.9 25 30 35 36.9 40 45 0.0 4.5 8.1 8.3 14.4 21.6 FY11 FY12 38.5 10.3
Page 8
Players like ABB, Bhel, EMC, L&T and JYS had been able to increase their market share at the cost of Siemens, in FY12. Siemens market share decreased from a glorious 50.2% in FY11 to a mere 6.6% in FY12. We believe the competitive intensity peaked out in FY12 and was relatively calm in FYTD13
Exhibit 19: Share in substation package of different players for FY11 and FY12
ABB Ltd BHEL Electrical Manufacturing Company Jyoti Structures KEC International Ltd L&T SIEMENS LTD. TBEA Shenyang Transformer Group Co. Ltd Others 0 10 20 0.0 0.0 0.0 0.0 2.1 1.7 0.0 10.0 6.4 8.0 6.6 4.4 28.4 30 (%) 40 41.3 50 60 FY11 FY12 6.2 11.8 22.9
50.2
Reactor packages being a product based area are prone to intense competition from Chinese/Korean players. Hyosung Corporations absence from any order wins in FY12 was replaced by other Chinese/Korean players. Crompton Greaves had been a victim of this competition, with its market share declining from 27.7% in FY11 to almost half in FY12. Further, in FYTD13, Chinese/Korean players have cornered 92.1% of the total reactor orders
Exhibit 20: Share in reactor package of different players for FY11 and FY12
Hyosung Corporation ABB Ltd Xian XD Transformer Co. Ltd ABB Ltd Baoding Tianwei Baobian Electric Co. Ltd TBEA Shenyang Transformer Crompton Greaves Others 0 10 0.0 0.0 0.0 0.0 0.0 0.0 14.1 10.5 20 21.2 (%) 30 40 50 60 24.1 27.7 5.1 32.5 FY11 FY12 5.1 8.5 51.0
Transformers packages made up 4.4% and 5.5% of the total ordering in FY11 and FY12, respectively. Even though the overall capex on transformers increased, players like Crompton Greaves lost market share to newer entrants like Alstom T&D, TBEA Shenyang, Transformers and Rectifiers and Apar Industries. Further, for FYTD13, Chinese/Korean players had cornered 54.3% of the transformer orders
Exhibit 21: Share in transformer package of different players for FY11 and FY12
JV of Transformers & Rectifiers & ZTR ALSTOM T & D India TBEA Shenyang Transformer Group Co. Ltd Apar Industries SIEMENS LTD. Crompton Greaves Others 0 10 0.0 0.0 0.0 0.0 5.2 6.6 15.8 20.7 24.2 17.8 20 30 (%) 40 50 60.0 60 70 15.0 18.2 16.5 FY11 FY12
Page 9
(%)
78
72
77
73
72
67
69
68
Exhibit 23: Segment wise order book break-up of Kalpataru Power of | 6,170 crore (as on Q1FY13)
100 80 60 (%) 40 20 0 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 30 32 34 35 50 38 40 49 45 60 61 61 56 54 5 5 3 10 6 2 8 3 9 3 14 1 35 12 1 49 10 1 49 11 1 39 10 1 44
26
Transmission - International
Transmission - Domestic
Distribution
Infrastructure
872 872
817 817
PGCIL, 36 SEB's, 59
3230
3090
2766
2625
2665
2616
2545
Transmission
Substation
Rural Electrification
Private Sector, 5
Page 10
Exhibit 23: Segment wise order book break-up of Kalpataru Power of | 6,170 crore (as on Q1FY13)
100 80 60 (%) 40 20 0 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 30 32 34 35 50 38 40 49 45 60 61 61 56 54 5 5 3 10 6 2 8 3 9 3 14 1 35 12 1 49 10 1 49 11 1 39 10 1 44
26
Transmission - International
Transmission - Domestic
Distribution
Infrastructure
872 872
817 817
PGCIL, 36 SEB's, 59
3230
3090
2766
2625
2665
2616
2545
Transmission
Substation
Rural Electrification
Private Sector, 5
Page 11
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;
Pankaj Pandey
Head Research ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com
pankaj.pandey@icicisecurities.com
ANALYST CERTIFICATION
We /I, , Chirag Shah PGDBM research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
Disclosures:
ICICI Securities Limited (ICICI Securities) and its affiliates are a full-service, integrated investment banking, investment management and brokerage and financing group. We along with affiliates are leading underwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on reasonable basis, ICICI Securities, its subsidiaries and associated companies, their directors and employees (ICICI Securities and affiliates) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities is acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return of investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities and its affiliates might have managed or co-managed a public offering for the subject company in the preceding twelve months. ICICI Securities and affiliates might have received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. ICICI Securities and affiliates expect to receive compensation from the companies mentioned in the report within a period of three months following the date of publication of the research report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. It is confirmed that Chirag Shah PGDBM research analysts and the authors of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on the profitability of ICICI Securities, which include earnings from Investment Banking and other business. ICICI Securities or its subsidiaries collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. It is confirmed that Chirag Shah PGDBM research analysts and the authors of this report or any of their family members does not serve as an officer, director or advisory board member of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. ICICI Securities and affiliates may act upon or make use of information contained in the report prior to the publication thereof. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Page 12