* Bhopal UHV Test lab damage affected power transformer sales:
CGL’s Bhopal Ultra High Voltage (UHV) test facilities’ civil structures were damaged due to cyclone, affecting transformer testing and hence, (Rs260 mn) deliveries in June’09. While it is likely to impact delivery in 1H (despite alternate arrangements worked-out), management expects the civil structures to be resurrected within 3-4 months, and hence, high growth in 2H FY10 to compensate for delivery losses in 1H.
* Healthy OB at Rs61.5 bn; but guidance lowered: At the end of 1Q FY10, CGL had an OB of Rs61.4 bn (+2% YoY) as international business order inflow picked up slightly. Standalone OB rose 13% YoY to Rs27.4 bn. But the management lowered standalone guidance to 12-14% (from 15%) as industrial orders are taking time to pick-up. It lowered guidance for international business also to 4-5% (10% earlier) as delivery schedules for its slip transformers framework contract (Eur200 mn over 3 years) was lower in 1Q as bankers delayed disbursals to wind-farm developers (Pauwell’s clients).
* PAT +29%; segmental margins expand– CGL reported 1Q FY10 PAT of Rs1.1 bn (+29% YoY) versus JMFe of Rs970 mn despite 15.5% decline in industrial systems revenues, lowering overall revenue growth (+8.4% YoY) vs. JMFe of +16.2%. EBITDA (Rs1.7 bn, OPM +210 bps) grew 26% YoY primarily because of 270bps savings in RM/sales. Segmental margins expanded with Power systems at 15.9% (+340bps YoY) while industrial systems’ margin grew 266 bps to 20%. Consumer segment (sales +9.5%) margins increased +290bps to 14.1%, due to seasonality.
Consolidated PAT was up 31% YoY to Rs1.6 bn on margin expansion of 100 bps to 11.1% and lower interest costs (-67% YoY). Sales (Rs22 bn) grew 8% YoY. Margin expansion was driven by dip in RM/sales of 300bps.
* Maintain Buy with revised TP of Rs 350: We increase FY10E & FY11E consolidated PAT estimate by 9.8% and 8.6%, despite downward revision in sales estimate (4% and 2.5% for FY10E & FY11E respectively) on degrowth in industrial and lower growth in power systems. But we raise margins across segments as company surpassed estimates on all fronts. We will not be too concerned with lower guidance as the management is generally conservative and betters its guidance. Marginal up-tick in international OB and better (19.3%) earnings CAGR led us to increase exit multiple to 16x (15x) to arrive at new TP of Rs350 for Mar-10. Buy.
Standalone sales lower, profits soar
CGL reported 1Q FY10 profits of Rs1.1 bn (+29% YoY), higher than street estimate of 24% YoY growth, despite just 8% YoY growth in 1Q FY10 revenue to Rs11.7 bn (+17.1% YoY). EBITDA was +26% YoY at Rs1.7 bn primarily because of 270bps savings in RM/sales. Margins stood at 14.8% (+210bps YoY) even as other expenditure rose 50 bps. CGL also expanded individual segmental margins with Power systems leading the way at 15.9% (+340bps YoY) while industrial systems’ margin grew 270bps to 20% (despite revenue de-growth of 15.5%). Consumer segment posted 9.5% sales growth and 290 bps increase in margins to 14.1%.
Thank you for indepth analysis of the stock and its performance. we appreciate the efforts that you have putin in posting it on the board. we expect more such messages from you, sir.
Crompton to bid for Areva
With Trehans focus on T&D biz , Cromptons with its war chest would bid for the Areva T&D biz which is up for sale world over. This would keep CG on level or ahead of Siemens and ABB
This is my strong guess. I have invested and followed CG and Areva from the past 5 years.All the pointers add up to this move. Cg has -[1]T&D focus going forward but not current biz size[2]WAr Chest for accqusitions [3] AReva has put the T&D biz globally onblock [4] CG has proven expertise to buy Global Co`s [Ganz Pauwells etc]and make it value accretive.
I think for sure if they get Areva at a correct price they will go fr it.
| NIFTY 
