Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Engineering & Capital Goods - India - In dire stratis - ICICI Securities

Posted On: 2020-10-25 23:48:36

Given the global macro challenges in thermal power sector, GE group has taken a decision to exit the newly build coal power market. This puts the operations of the domestic listed entity GE Power India in jeopardy as it is dependent on the parent in terms of pre-qualifications for boilers and utility grade flue gas de-sulphurisation (FGD) orders. Currently, the Indian entity is in talks with the parent to resolve the situation amicably, which we believe, will come at a cost. In their recent investor interaction, the company shared a challenging outlook in terms of the domestic coal power market and we believe the scenario will pose a challenge to other dominant players in the sector like BHEL. Taking into account the changed scenario, we downgrade GE Power to REDUCE with a revised target price of Rs363 (previously: Rs640) and reiterate SELL on BHEL with an unchanged target price of Rs24.

- Bleak outlook for domestic coal power market to continue - In the recent investor interaction, GE Power India highlighted that the headwinds of the domestic coal power market may continue in near to medium term. They are unlikely to extend the technical partnership with BHEL and will focus more on services segment leveraging on their technological leadership. The announcement by GE, which follows the gradual de-focus from thermal power market by Siemens and sale of high voltage segment by ABB group, indicates structural demand weakness from this segment.

- FGD orders to fuel near-term growth, deadline likely to extend by two years - Majority ordering from NTPC is complete and currently ~84GW of FGD orders are finalised. ~145 GW of ordering towards FGD is pending finalisation predominantly from state electricity board and private sector. We believe the funding and weak balance sheet of some of these entities can pose a challenge in terms of payment. GE management expects postponement of FGD implementation deadline by ~2 years from the current 2022.

- Exit of global MNCs from coal power markets to pose challenge to domestic subsidiaries - Domestic subsidiaries are dependent on the parent in terms of pre-qualifications, technology and patents. With the exit of parent like GE, local listed entities like GE Power India will find it tough to compete unless an alternate arrangement is worked out which allows continuation of the status quo. We believe this will come at a cost and impact near- to medium-term margins given the challenging environment.

- We foresee restructuring and impairment cost for the existing coal power equipment facility in domestic market - BHEL has a current capacity of 15GW per annum of coal power equipment facility and GE Power India has a plant in Durgapur for boiler power parts and related boiler equipment. Given the current demand headwinds, we believe, these companies will be forced to take an impairment of their facilities unless they are able to improve utilisation. Additionally, there will be a need to restructure the existing operations, which will lead to a one-time cost.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Vardhman Special Steel - Q2FY21 Company Update - ICICI Direct

Initiating Coverage - Advanced Enzyme Technologies - ICICI Direct

L&T - Secures Large Contract - Nov 25, 2020 - Angel Broking

Alembic Pharmaceuticals - Tentative Approval for JV - Angel Broking

Drug launch by Lupin - Tacrolimus Capsules - Angel Broking

Gujarat Gas - Nov 25, 2020 - Angel Broking

Metropolis Healthcare - Nov 25, 2020 - Angel Broking

NTPC - Showcase of strength & competitiveness - ICICI Securities

Telecom - Market Share TRACKER - Bharti is narrowing the gap on incremental market share vs RJio - ICICI Securities

Cochin Shipyard - Q2FY21 Result Update - ICICI Direct

Engineers India - Q2FY21 Result Update - ICICI Direct

Rupee - Nov 24, 2020 - Reliance Securities

FMCG Sector Update - Recovery unlocked; lower growth divergence - HDFC Securities

Engineers India - Consultancy segment outperformance - ICICI Securities

Engineers India - Q2 FY21 Result Update - YES SECURITIES

Motherson Sumi Systems - Company Update - Virtual Investor Conference - ICICI Direct

Mutual Fund Review - November, 2020 - ICICI Direct

Sadbhav Engineering - Q2FY21 Company Update - ICICI Direct

IRB Infrastructure - Q2FY21 Company Update - ICICI Direct

Vodafone Idea fund raising - Angel Broking

Rupee - Nov 23, 2020 - Reliance Securities

Crude Oil - Nov 23, 2020 - Reliance Securities

Q2FY21 Bank Result Quick Review - Angel Broking

Banks & NBFC's Sector Update Report - Yet another watershed moment? - HDFC Securities

Galaxy Surfactants - EBITDA/kg has an upside risk - ICICI Securities

Diagnostics - COVID-19 tests continue to trend higher - ICICI Securities

Banking & Financial Services - Sector Update - Nov 22, 2020 - ICICI Direct

Dalmia Bharat Sugar - Q2FY21 Company Update - ICICI Direct

Balkrishna Industries - Industry export growth momentum continues - ICICI Securities

Covid Recovery Pulse - Festive positivity continues in auto retails, E-way bill generation improves... - ICICI Direct

Quant Pick - Exide Industries - ICICI Direct

Shankara Building Products - Q2FY21 Company Update - ICICI Direct

Triveni Engineering - Q2FY21 Company Update - ICICI Direct

Initiating Coverage on Sudarshan Chemical - Leaping into the league of giants - HDFC Securities

Earnings Wrap Q2FY21: Earnings outperform, post Covid recovery picks up steam - ICICI Direct

Vodafone Idea Positive development beneficial for IDFC first bank - Angel Broking

Lakshmi Vilas Bank - Angel Broking

WIPRO Buyback record date announcement - Angel Broking

TCS buyback record date announcement - Angel Broking

Banks Sector Update - Collection efficiency - a positive surprise! - HDFC Securities

Quant Pick - Max Financial Services - ICICI Direct

Graphite India - Q2FY21 Result Update - ICICI Direct

Gladiator Stocks - Maruti Suzuki India - ICICI Direct

Exide Industries - Q2FY21 Result Update - ICICI Direct

Mishra Dhatu Nigam - Execution outlook remains strong - ICICI Securities

Bharat Electronics - Diversifying into multiple revenue streams - ICICI Securities

Wipro Ltd - Virtual Analyst Meet Update - ICICI Direct

Avadh Sugar & Energy - November 2020 - Company Update - ICICI Direct

Mahindra Lifespace Developers - H1FY21 Company Update - ICICI Direct

Quant Pick - Godrej Consumer Products - ICICI Direct

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019