>BGR ENERGY SYSTEMS

 4QFY12 in line with expectations —BGRL’s 4QFY12 PAT at Rs672mn down 32% YoY was in line with CIRA at Rs677mn. In FY12 sales were down 27% YoY, margins expanded 234bps and PAT at Rs2.2bn was down 31% YoY.


 B/S stress visible — While W/C intensity (measured by [NCA – Cash] Days of Sales) has improved to 210 days vs 289 days at the end of 1HFY12 it has deteriorated vis-àvis that of 103 days at the end of FY11. The company CFO was -3.5bn in FY12 vs - 2.2bn in FY11. We expect the B/S to deteriorate further as the company embarks on the construction of the BTG factories from July 2012. It is pertinent to note that this might not have a P&L impact till FY16E when these facilities get comissioned.


 Guidance for FY13E and visibility for FY14E — BGRL expects Rs43bn of sales in FY14E. The company has Rs103bn of orders and expects the remaining bulk orders of Rs48bn soon, taking the tally to Rs151bn. Out of these bulk orders, Rs85bn will not be booked revenues in FY13E. Of the remaining Rs66bn, Rs43bn will be booked in FY13E, and Rs23bn will be booked in FY14E. 10% of bulk orders (Rs8.5bn) could be booked in FY14E, taking FY14E revenue visibility to Rs31.5bn currently.


 Targets Rs150bn of orders in FY13E — BGRL already has Rs48bn of orders in the bag. Beyond this the company expects to win an additional Rs100bn of orders out of the 5.3GW (Rs220bn) pipeline by Dec12 and the 3.3GW (Rs138bn) pipeline by Mar13.


 Maintain Sell (3H) — Given we expect: (1) margins to decline structurally (314bps in next three years), (2) structurally declining RoEs FY11 - 39% to FY15E – 15%, (3) EPS decline of 8% over FY11-14E vs 55% growth over FY08-11.


 Target price cut to Rs252 — From Rs272 earlier to factor in (1) EPS cuts of 11-18% over FY13E-14E, (2) target P/E of 8.5x (v/s 8x earlier) and (3) P/E pegged at average EPS over FY13E, FY14E and FY15E (v/s FY13E earlier).


RISH TRADER