praveen
22-07-2008, 09:18 AM
This is a compiled report
Company
Areva T&D is a subsidiary of Areva, a French PSU and the global leader in nuclear technology. It is the third largest company in the world in Transmission & Distribution (T&D) equipment business. Areva, the parent, has manufacturing facilities in 41 countries and a sales network in more than 100 countries. It offers technological solutions for power generation and electricity transmission and distribution. It is the world
leader in nuclear power plants and equipments. Areva T&D possesses the highest end of technology for T&D systems. It supplies products, systems and services for electricity transmission and distribution. They are used to regulate, switch, transform and dispatch
electric current in electric power networks connecting the power plant to the final user. Its customers are electric utilities as well as the oil, mining and metals, wind energy, paper and glass, transportation, and power engineering industries.
Key Investment Arguments
T&D capex of Rs. 700cr. - Areva (T&D) India plans for nearly Rs. 700cr. in capex to upgrade its technological capability to 1,200 KV in transformers (HVDC, instruments and distribution transformers), gas insulated switchgear and circuit breakers. These will be fully commissioned by the 2nd half of FY09 at Gujarat (Baroda), Karnataka (Hosur) and Tamil Nadu (Chennai).
Turnover to touch Rs. 4000cr. by CY10. Following the Rs. 700cr. capex till mid-FY09, the company plans to brace itself for the order inflow expected in the XII Plan. The Plan envisages adding generating capacity of 84GW to 92GW, mostly requiring technology in HVDC, and the 765 KV and 1,200 KV range for both transformers and substations. Sales as a result are likely to double to Rs. 4000cr by 2010.
Aiming at a leading position in the high-voltage segment. Areva has already delivered India’s first 765 KV substation for NTPC’s Sipat Power Project (2,320 MW) at Chattisgarh. It will bid aggressively for all 765 KV turnkey substation projects of PGCIL in the XI and XII Plans. It is among the top three global players in the ultra-high voltage segments of transformers, GIS and automation systems and is likely to emerge as a strong contender to bag the orders under the XI and XII Plans.
Areva’s order book is at Rs. 2934cr. It has risen by 46.3% yoy and is executable over the next 24 to 26 months. The break-up of the order book is - Systems 55%, Products 40%, Automation 3% and Service 2%. The systems component roughly represents Rs. 1510cr of EPC or turnkey jobs to be executed over the next two years.
Areva, the parent company of Areva T&D is a leading player in the nuclear power sector across the world. With India close to signing a nuclear power deal with the US, focus is likely to shift on developing nuclear power plants in India. Areva being a key player in this segment, remains a strong contender for bagging orders related to nuclear power plant construction and equipments. This should result in exponential growth in its order book and profitability going ahead. However, this is contingent to the successful signing and completion of the Indo-US nuclear deal. There has been strong resistance to the deal from a few quarters in India which has delayed the deal.
Areva has a market cap of Rs. 7113.7cr, average daily volume of 23215 shares for the last six months and net sales of Rs. 2058cr during the trailing twelve months ending 31st March 2008.
It’s EBITDA and Net Profit margins were at 18.9% and 10.8% resp. for the year ending Dec 31, 2007. Margins have contracted slightly in the first quarter to 18.1% and 9.7% resp. The company enjoys a healthy and consistently growing Return on Equity, which stood at 46.94% in 2007.
The company has achieved a 5-year CAGR of 36.6% in revenues, 93% in EBITDA and 106.4% in Net Profits. Its operating cash flows have been consistently positive and have grown at a 5-year CAGR of 7.6%. The company has enjoyed positive free cash flows in 5 out of last 6 years.
Areva trades at a PE multiple of 32.6 based on EPS for the TTM ended March 31, 2008, Price to Book ratio of 13.0 on 2007 bookvalue and Price to Sales ratio of 3.5 based on sales for TTM ended Mar 31, 2008.
Key Concerns
A delay in funding, results in a further delay in the award of projects. During the previous year there was a delay of several months in projects earmarked under World Bank financing. Several large 765 kV substations & HVDC are to be implemented in the 11th plan. A delay in these projects would have an impact on the planned growth of Company.
A rise in raw material costs, especially metals may put a strain on margins. The price of copper, the main raw material required by the Company has increased substantially during the last year. However, base metal prices including copper have cooled off since and are likely to moderate in the near future. This should provide some relief to the company.
Latest Development
Areva has secured 2 large and prestigious export orders. Kenya Power & Light placed an order worth US$26 million of turnkey substations for their distribution network. KAHRAMA, Qatar's General Electricity & Water Company, placed an order worth Euro 86 million to build 6 GIS turnkey substations in Qatar. In the domestic market, NTPC placed an order worth Rs. 80cr for building turnkey substations at Dadri, Korba & Farakka. Power Grid placed an order worth Rs. 100cr. for their Package 'B' substation in Bihar. GETCO placed orders worth Rs. 56.8cr for their turnkey substations at Kukma & Wagra, while DPL placed an order of Rs. 25.7cr for their 220 kV substation at Durgapur.
Conclusion
On the basis of our research, we feel that this is a good stock to buy at the current market price . If everything goes well, the price is likely to appreciate to Rs. 2012.0, within 12-18 months,translating into a gain of about 35%.
Company
Areva T&D is a subsidiary of Areva, a French PSU and the global leader in nuclear technology. It is the third largest company in the world in Transmission & Distribution (T&D) equipment business. Areva, the parent, has manufacturing facilities in 41 countries and a sales network in more than 100 countries. It offers technological solutions for power generation and electricity transmission and distribution. It is the world
leader in nuclear power plants and equipments. Areva T&D possesses the highest end of technology for T&D systems. It supplies products, systems and services for electricity transmission and distribution. They are used to regulate, switch, transform and dispatch
electric current in electric power networks connecting the power plant to the final user. Its customers are electric utilities as well as the oil, mining and metals, wind energy, paper and glass, transportation, and power engineering industries.
Key Investment Arguments
T&D capex of Rs. 700cr. - Areva (T&D) India plans for nearly Rs. 700cr. in capex to upgrade its technological capability to 1,200 KV in transformers (HVDC, instruments and distribution transformers), gas insulated switchgear and circuit breakers. These will be fully commissioned by the 2nd half of FY09 at Gujarat (Baroda), Karnataka (Hosur) and Tamil Nadu (Chennai).
Turnover to touch Rs. 4000cr. by CY10. Following the Rs. 700cr. capex till mid-FY09, the company plans to brace itself for the order inflow expected in the XII Plan. The Plan envisages adding generating capacity of 84GW to 92GW, mostly requiring technology in HVDC, and the 765 KV and 1,200 KV range for both transformers and substations. Sales as a result are likely to double to Rs. 4000cr by 2010.
Aiming at a leading position in the high-voltage segment. Areva has already delivered India’s first 765 KV substation for NTPC’s Sipat Power Project (2,320 MW) at Chattisgarh. It will bid aggressively for all 765 KV turnkey substation projects of PGCIL in the XI and XII Plans. It is among the top three global players in the ultra-high voltage segments of transformers, GIS and automation systems and is likely to emerge as a strong contender to bag the orders under the XI and XII Plans.
Areva’s order book is at Rs. 2934cr. It has risen by 46.3% yoy and is executable over the next 24 to 26 months. The break-up of the order book is - Systems 55%, Products 40%, Automation 3% and Service 2%. The systems component roughly represents Rs. 1510cr of EPC or turnkey jobs to be executed over the next two years.
Areva, the parent company of Areva T&D is a leading player in the nuclear power sector across the world. With India close to signing a nuclear power deal with the US, focus is likely to shift on developing nuclear power plants in India. Areva being a key player in this segment, remains a strong contender for bagging orders related to nuclear power plant construction and equipments. This should result in exponential growth in its order book and profitability going ahead. However, this is contingent to the successful signing and completion of the Indo-US nuclear deal. There has been strong resistance to the deal from a few quarters in India which has delayed the deal.
Areva has a market cap of Rs. 7113.7cr, average daily volume of 23215 shares for the last six months and net sales of Rs. 2058cr during the trailing twelve months ending 31st March 2008.
It’s EBITDA and Net Profit margins were at 18.9% and 10.8% resp. for the year ending Dec 31, 2007. Margins have contracted slightly in the first quarter to 18.1% and 9.7% resp. The company enjoys a healthy and consistently growing Return on Equity, which stood at 46.94% in 2007.
The company has achieved a 5-year CAGR of 36.6% in revenues, 93% in EBITDA and 106.4% in Net Profits. Its operating cash flows have been consistently positive and have grown at a 5-year CAGR of 7.6%. The company has enjoyed positive free cash flows in 5 out of last 6 years.
Areva trades at a PE multiple of 32.6 based on EPS for the TTM ended March 31, 2008, Price to Book ratio of 13.0 on 2007 bookvalue and Price to Sales ratio of 3.5 based on sales for TTM ended Mar 31, 2008.
Key Concerns
A delay in funding, results in a further delay in the award of projects. During the previous year there was a delay of several months in projects earmarked under World Bank financing. Several large 765 kV substations & HVDC are to be implemented in the 11th plan. A delay in these projects would have an impact on the planned growth of Company.
A rise in raw material costs, especially metals may put a strain on margins. The price of copper, the main raw material required by the Company has increased substantially during the last year. However, base metal prices including copper have cooled off since and are likely to moderate in the near future. This should provide some relief to the company.
Latest Development
Areva has secured 2 large and prestigious export orders. Kenya Power & Light placed an order worth US$26 million of turnkey substations for their distribution network. KAHRAMA, Qatar's General Electricity & Water Company, placed an order worth Euro 86 million to build 6 GIS turnkey substations in Qatar. In the domestic market, NTPC placed an order worth Rs. 80cr for building turnkey substations at Dadri, Korba & Farakka. Power Grid placed an order worth Rs. 100cr. for their Package 'B' substation in Bihar. GETCO placed orders worth Rs. 56.8cr for their turnkey substations at Kukma & Wagra, while DPL placed an order of Rs. 25.7cr for their 220 kV substation at Durgapur.
Conclusion
On the basis of our research, we feel that this is a good stock to buy at the current market price . If everything goes well, the price is likely to appreciate to Rs. 2012.0, within 12-18 months,translating into a gain of about 35%.