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Transmission Distribution ICICI Direct

VIEWS: 6 PAGES: 12

									       Sector Update
                                                                                                                                                                                                                                                   September 28, 2012
Sector View
Neutral                                                                                                                                                                  Transmission & Distribution
PGCIL planned vs. actual ordering
                                                                                                        Flows from the grid…
              20000
                                                                                                        Five months into FY13, Power Grid (PGCIL) has already doled out orders
              15000                                                                                     totalling | 6776 crore, a 217% YoY jump in ordering. Of the yearly target
                                                                                                        of | 20,000 crore of ordering in FY13, PGCIL has already achieved 33.9%
  (| Crore)




                                                                                              18500
              10000                                                                           18180     of the annual target. This is a notable progress over previous years (FY09-
                                                                                                        12), where H1 ordering hovered between 18% and 28% of annual
                                                                              12005
                                                                              11900
                                                                  10600
                                                                  10500




                5000
                                               8200
                                               8000




                                                                                                        ordering. Of these, | 6776 crore tenders, tower packages constituted
                                    6600
                                    6500




                       0
                                                                                                        26%, HVDC formed 37% & substation orders 15% of the total tenders.
                                    FY08        FY09              FY10         FY11           FY12      Of the companies under over coverage, KEC International (KEC) has won
                                                       Capex        Capex target                        total | 511.7 crore, Kalpataru Power (KPP) grabbed | 355.2 crore while
                                                                                                        Jyoti Structures (JYS) is yet to open its account for FY13.
Custom index of companies in T&D
                                                                                                        Unrelenting competition
  140                                                                                                   Competition continues to stay strong but with a diminishing intensity.
  120                                                                                                   Chinese/Korean players continue to remain aggressive in product based
  100                                                                                                   categories of insulator, transformer and reactor segments, seizing
      80                                                                                                68.3%, 54.3% and 92.1% of the respective total share in FYTD13.
      60                                                                                                Competition from other international players (ex-Chinese/Korean)
      40                                                                                                remains concentrated in technology intensive segments like HVDC.
      20
         0                                                                                              For projects involving EPC work, domestic competition remains high,
                                                                                                        with the number of bidders increasing across segments. The conductors
                                     Nov-08
              Sep-07




                                              Jun-09

                                                         Jan-10
                           Apr-08




                                                                   Aug-10

                                                                            Mar-11

                                                                                     Oct-11

                                                                                               May-12




                                                                                                        segment witnessed the number of vendors rising from eight in FY08 to
                                                        Peer Index                                      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
Source : Company, ICICIdirect.com Research                                                              from bidding this year, leading to better margin realisation for others.
This Peer Index is an equal weighted index of prices of four                                            Pastures to remain greener; competition stronger...
companies: KEC International, Jyoti Structures, Kalpataru Power and
Crompton Greaves                                                                                        PGCIL’s aggressive target of | 1,00,000 crore capex in the Twelfth Five
                                                                                                        Year plan (FYP), backed by a proven past performance in the Eleventh
PGCIL 12 FYP capex allocation                                                                           FYP, renders high visibility with respect to order awards in the T&D space.
                                                                                                        We expect tower and conductor ordering to the tune of | 10000 crore
                                                         Central                                        (based on industry players commentary and historical trends). We expect
                                                          sector                                        JYS, KEC and KPP to command reasonable order wins with healthy
                                                         projects                                       competition to become the new normal.
                                                                                                        Exhibit 1: Twelve month trailing P/E, higher no. of competitors across segments over FY09-TD13
                                                                        UMPP

                                                                      Grid                                         25
                                      IPPs                         Strengthen
                                                                                                                   20                                                                                                                FY12 -
                                                                       ing
                                                                                                                                                                                                                                     84
                                                                                                                   15
                                                                                                                                                                                                    FY11 - 57
                                                                                                             (X)




                                                                                                                   10                                                                                                                                     FYTD13 - 51

                                                                                                                   5                FY09 -                           FY10 -
Source: ICICIdirect.com Research
                                                                                                                                    36                               58
                                                                                                                   0
                                                                                                                        Oct-09
                                                                                                                                 Dec-09




                                                                                                                                                                      Aug-10
                                                                                                                                                                               Oct-10




                                                                                                                                                                                                                                     Oct-11
                                                                                                                                          Feb-10
                                                                                                                                                   Apr-10
                                                                                                                                                            Jun-10




                                                                                                                                                                                        Dec-10
                                                                                                                                                                                                 Feb-11
                                                                                                                                                                                                          Apr-11
                                                                                                                                                                                                                   Jun-11
                                                                                                                                                                                                                            Aug-11


                                                                                                                                                                                                                                              Dec-11
                                                                                                                                                                                                                                                       Feb-12
                                                                                                                                                                                                                                                                Apr-12
                                                                                                                                                                                                                                                                         Jun-12
                                                                                                                                                                                                                                                                                  Aug-12




                                                                                                                                                                     KEC                   KPP                     JYS                   CRG

                                                                                                        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
Analyst’s name
 Chirag Shah
 shah.chirag@icicisecurities.com


     ICICI Securities Ltd | Retail Equity Research
                                                              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)                               FY09                       FY10                         FY11                    FY12                 FY13 (Till Date)
             Total Ordering                      14,222.1                   12,068.5                     17,701.5                23,463.3                       6,776.5
             Of which, share of
             Indian                       13344.7 or 93.8 %           9343.5 or 77.4 %           11392.4 or 64.4 %         20673 or 88.1 %               2797.4 or 41.3 %
  Players




             Chinese/Korean                    606 or 4.3 %           1872.7 or 15.5 %               638.9 or 3.6 %        2472.9 or 10.5 %                1157 or 17.1 %
             Other International             271.4 or 1.9 %             852.3 or 7.1 %              5670.2 or 32 %           317.4 or 1.4 %              2822.1 or 41.6 %
Source: PGCIL, ICICIdirect.com Research


The historical trend suggests that on average PGCIL           Exhibit 3: Trend in quarterly ordering in PGCIL’s orders
orders between 18% and 28% (FY09-H1FY13) of its                (| Crore)                         Q1                   Q2          Q3                Q4             Total
annual ordering target in H1 of any fiscal, thereby
making the overall process highly back ended. Even in          FY09                        1,453.4            2,684.4        3,602.1           6,551.9        14,222.0
H1FY13, PGCIL did 34% of the overall ordering                  FY10                        1,243.2            1,620.8        2,599.0           6,559.5        12,068.5
(includes one big order of HVDC system)                        FY11                        1,037.4            2,191.1        1,579.3          12,893.8        17,701.5
                                                               FY12                          329.1            3,500.9        8,123.2          11,510.2        23,463.3
                                                               FY13                        5,978.2              798.3            -                 -           6,776.5
                                                              Source: ICICIdirect.com Research


                                                              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.




            ICICI Securities Ltd | Retail Equity Research                                                                                                 Page 2
                                                                Exhibit 4: Quarter wise order finalisation of annual tendering

                                                                   FY13 (Till Date)                                                         88.2                                                 11.8

                                                                             FY12 1.4           14.9                        34.6                                              49.1
More than 70% of the orders (by value) are tendered out in
the third and fourth quarter of the year; with fourth quarter                FY11         5.9        12.4         8.9                                             72.8
being the busiest quarter at PGCIL
                                                                             FY10             10.3         13.4                 21.5                                     54.4

                                                                             FY09             10.2             18.9                    25.3                                    46.1

                                                                                      0              10         20         30          40          50         60         70          80     90          100
                                                                                                                                                   (%)
                                                                                                                                       Q1      Q2        Q3        Q4

                                                                Source: Company, ICICIdirect.com Research




                                                                Exhibit 5: Number of orders tendered
                                                                                                      Q1                        Q2                           Q3                   Q4                     Total
                                                                FY09                                  32                        46                           55                   87                     220
                                                                FY10                                  21                        25                           37                   78                     161
                                                                FY11                                  23                        34                           26                   86                     169
                                                                FY12                                   9                        57                           89                 134                      289
                                                                FY13                                  86                        48                       -                      -                        134
                                                                Source: Company, ICICIdirect.com Research


                                                                Exhibit 6: Quarter wise number of order finalisation of annual tendering


                                                                   FY13 (Till Date)                                         64                                                         36                0


                                                                             FY12         3               20                         31                                         46


                                                                             FY11               14                    20                  15                                  51


                                                                             FY10               13              16                     23                                      48


                                                                             FY09               15                    21                       25                                    40


                                                                                      0              10         20         30          40          50         60         70          80     90          100
                                                                                                                                       Q1      Q2        Q3        Q4

                                                                Source: Company, ICICIdirect.com Research




  ICICI Securities Ltd | Retail Equity Research                                                                                                                                             Page 3
Exhibit 7: Components of ordering in transmission sector




                                                                               Transmission




                                             Transmission
                                                                                                                           Substation
                                                 line



                                                                                                                           Substation
              Tower package                   Conductors            Insulators               Transformer                                                   Others
                                                                                                                            package


Source: Company, ICICIdirect.com Research


                                                                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    Exhibit 8: Ordering division by type of work
   segment makes up the rest                                            (%)                          FY09               FY10             FY11               FY12 FY13 (Till Date)
                                                                Conductor Package                    26.0               12.3             16.3               22.5                4.2
                                                                Substation package                   17.3               15.3             11.5               14.5              14.8
                                                                Tower Package                        31.0               38.6             30.4               37.8              25.7
                                                                Transformer Package                    7.5              10.8               4.4                5.5               6.6
                                                                Insulator Package                      2.8               8.0              1.9                4.5                3.9
   After from tower, conductor and substation packages, all
                                                                Transmission line package              1.8               0.8              1.0                 4.7               3.5
   the other segments command mid single digit allocations.     Reactor Package                        1.8               9.2              1.3                 4.4               2.4
                                                                HVDC                                  0.0                0.0             30.1                 0.0             36.8
                                                                Miscellaneous                          0.0               0.0               0.0                0.3               0.7
   HCPTC/HCDC orders tend to be bulky in nature, with two       Cable Package                          0.0               0.0               0.0                1.2               0.0
   orders been tendered till date. The first one, valued at |   Civil Construction                    0.0                0.0              0.0                0.3                1.5
   5325 crore was tendered in March 2011 to ABB (parent)        Rural electrification                10.7                2.2              0.0                0.0                0.0
   while the second one in June 2012, worth | 2495 crore        Others                                 1.2               2.8               3.2                4.4               0.0
   was to Alstom                                                                                    100.0              100.0            100.0              100.0             100.0
                                                                                                             The cells with this formatting highlight the type of package having
                                                                                                               the highest share of total value of tenders in the particular FY
                                                                Source: Company, ICICIdirect.com Research




     ICICI Securities Ltd | Retail Equity Research                                                                                                                 Page 4
   Tower packages had shown a steady growth in capex from             Exhibit 9: YoY growth in ordering in key segments
   PGCIL, thereby providing ample opportunities for players           YoY Growth ( %)                                                    FY10                  FY11                   FY12
   like JYS, KEC and KPP. Further, on the back of an enhanced         Insulator Package                                                 144.2                  -65.9                 220.0
                                                                      Substation Package                                                -25.2                   10.2                  66.9
   overall capital outlay, all segments had witnessed
                                                                      Transformer Package                                                22.6                  -39.8                  64.2
   considerable growth rates
                                                                      Others                                                            103.6                   64.7                  84.2
                                                                      Conductor Package                                                 -59.9                   94.2                  83.2
   Also, growth rates for segments across the board appear
                                                                      Tower Package                                                        5.9                  15.5                  64.7
   elevated in FY12 due to the low base affect of FY11. In            Transmission Line Package                                         -62.0                   84.1                 528.5
   FY11, tenders totalling | 17,701.5 crore were finalised of         Reactor Package                                                   338.8                  -79.6                 351.6
   which a single HCPTC/HCDC order valued at | 5325 crore
                                                                      Source: Company, ICICIdirect.com Research
   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 %)                         FY09                          FY10                          FY11                          FY12                     FY13 (Till Date)

Insulator Package                      64.5 | 22.5 | 13              40.1 | 58.6 | 1.4              31.2 | 67.9 | 1               12.2 | 87.8 | 0               31.7 | 68.3 | 0

Substation package                      91.1 | 0 | 8.9                69.3 | 7.7 | 23               88.1 | 2.7 | 9.2              84 | 15.5 | 0.5               41.8 | 58.2 | 0

Transformer Package                     51.3 | 48.7 | 0              41.8 | 51.4 | 6.8              68.7 | 31.3 | 0               83.5 | 16.5 | 0               45.7 | 54.3 | 0

Tower Package                             100 | 0 | 0                  96.4 | 0 | 3.6                 100 | 0 | 0                  96.9 | 0 | 3.1               84.4 | 0 | 15.6

Conductor Package                         100 | 0 | 0                  90.5 | 0 | 9.5                 100 | 0 | 0                   100 | 0 | 0                 80.2 | 0 | 19.8

Transmission line package                 100 | 0 | 0                   100 | 0 | 0                   100 | 0 | 0                  98.8 | 0 | 1.2                 100 | 0 | 0

Reactor Package                           100 | 0 | 0                 55.1 | 44.9 | 0                 49 | 51 | 0                 34.8 | 65.2 | 0                7.9 | 92.1 | 0

HVDC                                           -                              -                       0 | 0 | 100                        -                        0 | 0 | 100

Miscellaneous                                  -                              -                            -                        100 | 0 | 0                   100 | 0 | 0

Cable Package                                  -                              -                            -                        100 | 0 | 0                         -

Civil Construction                             -                              -                            -                       97.3 | 0 | 2.7                 100 | 0 | 0

Rural electrification                     100 | 0 | 0                  93.5 | 0 | 6.5                      -                             -                              -

Others                                    100 | 0 | 0                   100 | 0 | 0                 72.5 | 0 | 27.5              85.1 | 14.2 | 0.7                  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
     How to read the table       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


Source: Company, ICICIdirect.com Research




     ICICI Securities Ltd | Retail Equity Research                                                                                                                          Page 5
Exhibit 11: Key players operating in different segments in the transmission sector
                                                 KEC Intl * Kalpataru Power * Jyoti Structures * EMC * Gammon India * Tata Projects * L&T * Indo Projects* Aster Pvt Ltd * Shyama
       Transmission Line




                           Tower Packages
                                                                                                    Power * EMCO * ICOMM Tele *
                                                  Sterlite Technologies * Apar industries * Gammon India * Gupta Power Infrastructure * Smita Conductors * Deepak Cables * Vijai
                             Conductors
                                                                               Electricals * Hindustan Vidyut Products * Diamond Power * Genus Power
                                                W S Industries * Nanjing Electric* Dongguan Gaoneng Electric * Zigong Sediver * Aditya Birla Insulators * Modern Insualtors * Jiangsu
                              Insultors
                                                                                      Xiangyuan Electric Equipment * SiChuan YiBin Global * BHEL
                                                    Crompton Greaves * Siemens * Apar Industries * TBEA Shenyang Transformer* Alstom T&D * ABB * BHEL * Hyosung Corp *
                            Transformers
                                                                      Transformers & Rectifiers India * Vijai Electrical * Baoding Tianwei Baobian Electric * EMCO
       Substation




                                                  L&T * Jyoti Structures * BHEL * EMC * KEC Intl * TBEA Shenyang Transformer * Siemens * Techno Electric & Engg. * Hyosung *
                             Substation
                                                                     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
                               Others
                                                                                                               Engineering *
Source: Company, ICICIdirect.com Research




                                                                    Exhibit 12: Number of successful vendors in various segments

                                                                        25                                                                          23                                                23

   Lured by attractive payment terms, high ordering activity            20                                                                     18
                                                                                              17                                                                                            17
   and growth opportunity, numerous Chinese/Korean and                                   15                          15                                                                          15
   domestic players entered a market so far dominated by                15                                                                                       12
                                                                                    11                                                                                     11
   traditional players. With heating competition across                                                  10                                                           10               10                  10
                                                                                                              9 9                      9
                                                                        10      8                                                          8
   segments, players like JYS, KEC, KPP and Crompton                                                                       7
                                                                                                                                                             6                  6
                                                                                                   5
   Greaves increased their focus in Gulf and Western                      5                                                       2
   countries for new orders. Meanwhile, in the domestic
   market, with bidders realising the folly in abnormally low             0
   bids and PGCIL blacklisting numerous players on technical                        Conductors                Insulators              Substation             Transformers                   Towers
   grounds, rationality in bids has started to resurface
                                                                                                                FY09       FY10   FY11         FY12       FY13 (Till Date)


                                                                    Source: Company, ICICIdirect.com Research




                                                                    Exhibit 13: Orders won by key T&D players from PGCIL
                                                                     (| Crore)                             FY09                FY10                          FY11                   FY12 FY13 (Till Date)
                                                                     Jyoti Structures                     860.4               736.5                         111.8                1,093.8             -
                                                                     Kalptaru Power Transm                618.0               219.6                         723.4                  928.4          355.2
                                                                     KEC International Ltd                796.8                77.2                         837.7                1,123.0          511.7
                                                                     BHEL                                 319.9               442.0                          69.0                  454.4            39.1
                                                                     L&T                                  531.1               414.0                         388.5                1,354.8             -
                                                                     Crompton Greaves                     595.1             1,000.7                         252.6                  568.9             -
                                                                     Tata Projects Ltd                    451.1               973.0                       1,163.6                1,606.2             -
                                                                     Gammon India                         847.9               243.5                         463.2                1,719.3             -
                                                                     Apar Industries                       87.0               292.4                         248.8                  962.4             -
                                                                     ABB Ltd                              723.4                21.0                          39.5                  299.8          235.9
                                                                     ABB International                     76.6               217.3                       5,403.8                    -               -
                                                                     Electrical Manufacturin              112.4               363.1                         129.8                1,690.3             -
                                                                     TBEA Shenyang Transf                   -                   -                             -                    606.9          152.8
                                                                     Alstom T & D India                     -                   -                             -                    506.5          173.7
                                                                     Alstom International                   -                   -                             -                      -         2,495.2
                                                                     Siemens Ltd.                         359.7               131.1                       1,146.3                  308.7          355.5
                                                                     Total ordering                    14,222.1            12,068.5                      17,701.5               23,463.3       6,776.5


                                                                    Source: Company, ICICIdirect.com Research




     ICICI Securities Ltd | Retail Equity Research                                                                                                                                       Page 6
                                                             Exhibit 14: Share of individual players in total tenders…
                                                             (%)                            FY09          FY10             FY11                               FY12            FY13 (Till Date)
                                                             Jyoti Structures               6 / IIIIII    6.1 / IIIIII     0.6 /                              4.7 / IIII      0/
                                                             Kalptaru Power Transmission    4.3 / IIII    1.8 / I          4.1 / IIII                         4 / III         5.2 / IIIII
                                                             KEC International Ltd          5.6 / IIIII   0.6 /            4.7 / IIII                         4.8 / IIII      7.6 / IIIIIII
                                                             BHEL                           2.2 / II      3.7 / III        0.4 /                              1.9 / I         0.6 /
                                                             L&T                            3.7 / III     3.4 / III        2.2 / II                           5.8 / IIIII     0/
                                                             Crompton Greaves               4.2 / IIII    8.3 / IIIIIIII   1.4 / I                            2.4 / II        0/
                                                             Tata Projects Ltd              3.2 / III     8.1 / IIIIIIII   6.6 / IIIIII                       6.8 / IIIIII    0/
                                                             Gammon India                   6 / IIIII     2 / II           2.6 / II                           7.3 / IIIIIII   0/
                                                             Apar Industries                0.6 /         2.4 / II         1.4 / I                            4.1 / IIII      0/
                                                             ABB Ltd                        5.1 / IIIII   0.2 /            0.2 /                              1.3 / I         3.5 / III
                                                             ABB International              0.5 /         1.8 / I          30.5 / IIIIIIIIIIIIIIIIIIIIIIIIIII 0 /             0/
                                                             Electrical Manufacturing Co    0.8 /         3 / III          0.7 /                              7.2 / IIIIIII   0/
                                                             TBEA Shenyang Transformer      0/            0/               0/                                 2.6 / II        2.3 / II
Even though the overall order inflows of all players under   Alstom T & D India             0/            0/               0/                                 2.2 / II        2.6 / II
over coverage have increased consistently over the years,    Alstom International           0/            0/               0/                                 0/              36.8 / IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
their share in PGCIL tendering had fluctuated noticeably     Siemens Ltd.                   2.5 / II      1.1 / I          6.5 / IIIIII                       1.3 / I         5.2 / IIIII
                                                             Source: Company, ICICIdirect.com Research




In the respective segments, KEC and KPP’s share in total     Exhibit 15: Share in total annual tendering in their respective categories
orders fell from 13.4/13.3% in FY09 to a mere 1.6/4.6% in       (%)                                       FY09               FY10                       FY11                   FY12 FY13 (Till Date)
FY10, respectively. Similarly, JYS’ market share fell from      Jyoti Structures                          10.0               10.7                         1.5                    8.2             0.0
10.7% in FY10 to 1.5% in FY11. The same had gradually           Kalptaru Power Transmission               13.3                 4.6                      13.0                     9.3            18.0
climbed back to comfortable levels post FY11, with              KEC International Ltd                     13.4                 1.6                      15.6                   11.0             25.9
competitive intensity reducing                                 Source: Company, ICICIdirect.com Research




  ICICI Securities Ltd | Retail Equity Research                                                                                                                                             Page 7
                                                            Exhibit 16: Share in tower packages of different players for FY11 and FY12

                                                                             Tata Projects Ltd                                                                18.1
In the tower space, Tata Projects, JYS, KEC, KPP and EMC                                                                                                             20.3
are the leading players. Recently, players like Gammon       Electrical Manufacturing Company                                            10.3
                                                                                                                                                  13.3
India have increased their focus in the segment, with its                                                                         8.5
                                                                 Kalptaru Power Transmission                                                      13.4
market share increasing from 6.8% in FY11 to 11.2% in
FY12. JYS also made a noticeable comeback with nil share                     Jyoti Structures                                     8.5
                                                                                                        0.0
                                                                                                                                                                       FY11        FY12
in FY11 to 8.5% in FY12                                                         Gammon India                                               11.2
                                                                                                                           6.8
                                                                                             L&T                                    9.0
                                                                                                                            7.2
                                                                          KEC International Ltd                            6.9
                                                                                                                                          10.8
                                                                                        Others                                                                                             27.4
                                                                                                                                                                                             28.3

                                                                                                    0.0           5.0             10.0      (%) 15.0           20.0           25.0           30.0



                                                            Source: Company, ICICIdirect.com Research


                                                            Exhibit 17: Share in transmission line package of different players for FY11 and FY12


                                                             Kalptaru Power Transmission                            15.5
                                                                                                  0.0

                                                                         Jyoti Structures         0.0
                                                                                                                                                    39.2

                                                                            Gammon India                                          24.9
                                                                                                  0.0

                                                                                       L&T                                        25.5                                  FY11        FY12
                                                                                                  0.0

                                                                      KEC International Ltd                                20.3
                                                                                                  0.0

                                                                                    Others                        13.9
                                                                                                                                                                            60.8

                                                                                              0.0          10.0         20.0        30.0          40.0       50.0      60.0         70.0
                                                                                                                                           (%)

                                                            Source: Company, ICICIdirect.com Research


Though Sterlite Technologies remains the undisputed         Exhibit 18: Share in conductor of different players for FY11 and FY12
market leader in the conductor segment, other players had
been successful in cornering some of its market share.                     Deepak Cables                                10.3
                                                                                                                  8.1
Players like Gupta Power Infrastructure, Gammon India and                                                         8.3
                                                                        Smita Conductors          0.0
Apar Industries had substantially increased their market
share in FY12 from FY11                                        Gupta Power Infrastructure                                        14.4
                                                                                                           4.5                                                               FY11         FY12
                                                                 Sterlite Technologies Ltd                                                        21.6
                                                                                                                                                                                    38.5
                                                                           Gammon India                           8.6
                                                                                                          3.4
                                                                         Apar Industries                                            15.8
                                                                                                                  8.6
                                                                                   Others                                                        20.9
                                                                                                                                                                               36.9

                                                                                              0            5       10          15          20           25     30       35           40          45
                                                                                                                                                 (%)


                                                            Source: Company, ICICIdirect.com Research




  ICICI Securities Ltd | Retail Equity Research                                                                                                                                 Page 8
Players like ABB, Bhel, EMC, L&T and JYS had been able to     Exhibit 19: Share in substation package of different players for FY11 and FY12
increase their market share at the cost of Siemens, in
FY12. Siemens’ market share decreased from a glorious                                          ABB Ltd                    6.2
                                                                                                               0.0
50.2% in FY11 to a mere 6.6% in FY12. We believe the                                              BHEL                               11.8
                                                                                                               0.0
competitive intensity peaked out in FY12 and was
                                                                      Electrical Manufacturing Company                                                22.9
relatively calm in FYTD13                                                                                      0.0
                                                                                      Jyoti Structures                           10.0
                                                                                                                2.1
                                                                                                                1.7                                                             FY11      FY12
                                                                                   KEC International Ltd                  6.4
                                                                                                    L&T                     8.0
                                                                                                               0.0
                                                                                         SIEMENS LTD.                     6.6
                                                                                                                                                                                              50.2
                                                               TBEA Shenyang Transformer Group Co. Ltd               4.4
                                                                                                               0.0
                                                                                                 Others                                                      28.4
                                                                                                                                                                                41.3

                                                                                                           0                10                20             30            40            50               60
                                                                                                                                                             (%)


                                                              Source: Company, ICICIdirect.com Research


Reactor packages being a product based area are prone to      Exhibit 20: Share in reactor package of different players for FY11 and FY12
intense competition from Chinese/Korean players. Hyosung
                                                                                  Hyosung Corporation          0.0
Corporation’s absence from any order wins in FY12 was                                                                                                                                          51.0
replaced by other Chinese/Korean players. Crompton                                             ABB Ltd                    5.1
                                                                                                               0.0
Greaves had been a victim of this competition, with its                                                                         8.5
                                                                           Xian XD Transformer Co. Ltd         0.0
market share declining from 27.7% in FY11 to almost half in
                                                                                               ABB Ltd                    5.1
FY12. Further, in FYTD13, Chinese/Korean players have                                                          0.0
                                                                                                                                                                                       FY11        FY12
cornered 92.1% of the total reactor orders                     Baoding Tianwei Baobian Electric Co. Ltd                                                             32.5
                                                                                                               0.0
                                                                          TBEA Shenyang Transformer                                                     24.1
                                                                                                               0.0
                                                                                     Crompton Greaves                                   14.1
                                                                                                                                                             27.7
                                                                                                 Others                              10.5
                                                                                                                                                     21.2

                                                                                                           0                    10             20      (%) 30              40            50               60



                                                              Source: Company, ICICIdirect.com Research




Transformers packages made up 4.4% and 5.5% of the total      Exhibit 21: Share in transformer package of different players for FY11 and FY12
ordering in FY11 and FY12, respectively. Even though the
overall capex on transformers increased, players like               JV of Transformers & Rectifiers & ZTR                               15.0
                                                                                                                    0.0
Crompton Greaves lost market share to newer entrants like
                                                                                    ALSTOM T & D India                                       18.2
Alstom T&D, TBEA Shenyang, Transformers and Rectifiers                                                              0.0
and Apar Industries. Further, for FYTD13, Chinese/Korean                                                                                    16.5
                                                               TBEA Shenyang Transformer Group Co. Ltd              0.0
players had cornered 54.3% of the transformer orders                                                                                                                       FY11        FY12
                                                                                         Apar Industries                   5.2
                                                                                                                    0.0

                                                                                           SIEMENS LTD.                     6.6
                                                                                                                                            15.8

                                                                                      Crompton Greaves                                             20.7
                                                                                                                                                      24.2

                                                                                                   Others                                    17.8
                                                                                                                                                                                                60.0

                                                                                                                0               10           20         30 (%) 40               50            60          70


                                                              Source: Company, ICICIdirect.com Research




  ICICI Securities Ltd | Retail Equity Research                                                                                                                                           Page 9
                                                                                                 Annexure: Carry forward of orders for KEC, KPP, JYS as on Q1FY13

                                                                                                 Exhibit 22: Segment wise order book break-up of KEC International of | 9,462 crore (as on Q1FY13)

                                                                                                                   100          0
                                                                                                                                2          0
                                                                                                                                           4              0
                                                                                                                                                          5            0
                                                                                                                                                                       5              1            1               4              4
                                                                                                                                                                                      4            5                                            7         6
                                                                                                                                                                                                                                  4
                                                                                                                      90       16                                                                                                               4         5
                                                                                                                                          18          15               19            17                           24
                                                                                                                                                                                                   20
                                                                                                                      80                                  2                                                                      23            18         18
                                                                                                                               13          2                                          1
                                                                                                                                                                       4                           2               2
                                                                                                                      70                                                                                                                        2         3




                                                                                                            .
                                                                                                                                                                                                                                  2




                                                                                                            (%)
                                                                                                                      60
                                                                                                                                          76          78                             77
                                                                                                                      50       69                                      72                          73             72                           69         68
                                                                                                                                                                                                                                 67
                                                                                                                      40
                                                                                                                      30
                                                                                                                             Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13

                                                                                                                                        Transmission          Cables        Power Systems                  Railways             Telecom & Water


                                                                                                 Source: Company, ICICIdirect.com Research


                                                                                                 Exhibit 23: Segment wise order book break-up of Kalpataru Power of | 6,170 crore (as on Q1FY13)

                                                                                                                   100         5        3         6
                                                                                                                                                  2            8             9            14            12             10             11            10
                                                                                                                               5        10                     3             3                                          1                            1
                                                                                                                                                                                           1             1                             1
                                                                                                                      80
                                                                                                                                                                                          35                                          39            44
                                                                                                                                                 61            56           54                          49             49
                                                                                                                      60      60        61
                                                                                                            (%)




                                                                                                                      40

                                                                                                                                                                                          50                                          49            45
                                                                                                                      20                                       34           35                          38             40
                                                                                                                              30        26       32

                                                                                                                         0
                                                                                                                              Q4FY10


                                                                                                                                       Q1FY11


                                                                                                                                                 Q2FY11


                                                                                                                                                              Q3FY11


                                                                                                                                                                            Q4FY11


                                                                                                                                                                                          Q1FY12


                                                                                                                                                                                                        Q2FY12


                                                                                                                                                                                                                       Q3FY12


                                                                                                                                                                                                                                      Q4FY12


                                                                                                                                                                                                                                                 Q1FY13
                                                                                                                               Transmission - International            Transmission - Domestic                   Distribution          Infrastructure

                                                                                                 Source: Company, ICICIdirect.com Research


Exhibit 24: egment wise breakup of order book of JYS                                                                                      Exhibit 25: Customer wise breakup of order book of JYS as on Q1FY13
                5500
                4750
                                                         896 493




                                                                                                                  833 1249
                                          425




                                                                   848 848

                                                                             963 788
    .




                4000
                                                                                                  872 872
                                                                                       817 817
                                                615
                       2792 452 862

                                       595




                                                205                                                                                                                                                                PGCIL, 36
    (| crore)




                3250
                2500
                                                3280
                                       3230




                                                         3090

                                                                   2766




                                                                                       2665




                                                                                                                                                                                     SEB's, 59
                                                                             2625




                                                                                                  2616

                                                                                                                  2545




                1750
                1000
                       Q1FY11

                                      Q2FY11

                                                Q3FY11

                                                         Q4FY11

                                                                   Q1FY12

                                                                             Q2FY12

                                                                                       Q3FY12

                                                                                                  Q4FY12

                                                                                                                  Q1FY13




                                                                                                                                                                                                                                 Private Sector,
                                      Transmission          Substation         Rural Electrification
                                                                                                                                                                                                                                        5
Source: Company, ICICIdirect.com Research                                                                                                 Source: Company, ICICIdirect.com Research




     ICICI Securities Ltd | Retail Equity Research                                                                                                                                                                                             Page 10
                                                                                                 Exhibit 23: Segment wise order book break-up of Kalpataru Power of | 6,170 crore (as on Q1FY13)

                                                                                                                   100        5        3         6
                                                                                                                                                 2           8          9            14       12            10          11         10
                                                                                                                              5        10                    3          3                                    1                      1
                                                                                                                                                                                      1        1                         1
                                                                                                                      80
                                                                                                                                                                                     35                                 39         44
                                                                                                                                                61           56        54                     49            49
                                                                                                                      60     60        61




                                                                                                            (%)
                                                                                                                      40

                                                                                                                                                                                     50                                 49         45
                                                                                                                      20                                     34        35                     38            40
                                                                                                                             30        26       32

                                                                                                                         0




                                                                                                                             Q4FY10


                                                                                                                                      Q1FY11


                                                                                                                                                Q2FY11


                                                                                                                                                         Q3FY11


                                                                                                                                                                       Q4FY11


                                                                                                                                                                                     Q1FY12


                                                                                                                                                                                              Q2FY12


                                                                                                                                                                                                            Q3FY12


                                                                                                                                                                                                                        Q4FY12


                                                                                                                                                                                                                                   Q1FY13
                                                                                                                              Transmission - International        Transmission - Domestic              Distribution      Infrastructure

                                                                                                 Source: Company, ICICIdirect.com Research


Exhibit 24: egment wise breakup of order book of JYS                                                                                     Exhibit 25: Customer wise breakup of order book of JYS as on Q1FY13
                5500
                4750
                                                         896 493




                                                                                                                  833 1249
                                          425




                                                                   848 848

                                                                             963 788
    .




                4000
                                                                                                  872 872
                                                                                       817 817
                                                615
                       2792 452 862

                                       595




                                                205                                                                                                                                                      PGCIL, 36
    (| crore)




                3250
                2500
                                                3280
                                       3230




                                                         3090

                                                                   2766




                                                                                       2665




                                                                                                                                                                                SEB's, 59
                                                                             2625




                                                                                                  2616

                                                                                                                  2545




                1750
                1000
                       Q1FY11

                                      Q2FY11

                                                Q3FY11

                                                         Q4FY11

                                                                   Q1FY12

                                                                             Q2FY12

                                                                                       Q3FY12

                                                                                                  Q4FY12

                                                                                                                  Q1FY13




                                                                                                                                                                                                                      Private Sector,
                                      Transmission          Substation         Rural Electrification
                                                                                                                                                                                                                             5
Source: Company, ICICIdirect.com Research                                                                                                Source: Company, ICICIdirect.com Research




     ICICI Securities Ltd | Retail Equity Research                                                                                                                                                                               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                                       pankaj.pandey@icicisecurities.com

                                                                        ICICIdirect.com Research Desk,
                                                                        ICICI Securities Limited,
                                                                        1st Floor, Akruti Trade Centre,
                                                                        Road No. 7, MIDC,
                                                                        Andheri (East)
                                                                        Mumbai – 400 093

                                                                         research@icicidirect.com

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       ICICI Securities Ltd | Retail Equity Research                                                                                                                                             Page 12

								
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