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Apr-Jun 2013 Earnings Preview
Order flow from Power Grid (Rs bn)
10.2 14.2 26.8
64.8
9.6
15.0 24.4 129.9
3.3
36.2
74.1
107.9
61.1
31.7
46.7
21.8
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Source: Company Data, PL Research
Power Grid (PWG) ordering for Q4FY13 and FY13 remained subdued. Ordering for
Q4FY13 stood at Rs21.8bn (down 80% YoY) and for FY13, stood at Rs161.4bn (down
28% YoY). Historically, ordering has been the strongest in the last quarter of the
year; however, Q4FY13 was surprisingly weak. Transmission EPC continued to
dominate ordering in Q4FY13 and FY13, with 39% and 45% share, respectively, in the
overall ordering followed by substation (30% & 35%) and Equipment ordering which
remained weak with a market share of 4% and 7% in Q4FY13 and FY13, respectively.
We believe that spill-over of orders in Q1FY14 should lead to better Q1FY14 (which is
usually a weak quarter in terms of ordering).
Transmission orders continue to command high share in the overall ordering in PWG
(45% in FY13). Signs of consolidation with old players like KEC/KPP/L&T gaining
significant market share first visible in H1FY13 continued to be visible in H2FY13 as
well (Exhibit 3). KEC/KPP/L&T had 60% market share in overall ordering for FY13.
However, the segment has also seen entry of foreign players like National
Contracting Company of Saudi Arabia and ISOLUX. Change in payment norms and
PWG preference for serious bidders might have resulted in increased market share
for old players like KEC, Kalpataru etc. We also understand from players in the
transmission EPC industry that the number of bidders in projects has further come
down to 4-5 from 7-9 in H1FY13 and 14-16 FY11/12. We believe that the competitive
intensity decreased due to the fact that PWG stopped opening bids of a lot of players
who were not performing in terms of execution. Also, people who had taken orders
at low margins are draining financially and hence, refraining from ordering. We
believe this trend of increasing market share and lower competition would augur
well for margins of players like KEC and Kalpataru, going ahead.
July 8, 2013 78