MOSL: CAPITAL GOODS - Order Tracker – In a positive territory, first time post 2011
Motilal Oswal Securities Ltd.
14 Mar 2014
Available for Immediate Download
CAPITAL GOODS (Order Tracker): In a positive territory, first time post 2011 Pace of order finalizations have witnessed major traction in Feb 2014, led by big ticket order finalizations in ports and power generation segments. Ordering activity was limited only to PSUs, while order finalization from private sector players continues to remain elusive. LT, TMX and KKC are Top Picks to play the possibility of an uptick in the investment climate. TTM Order finalizations up 18% YoY, importantly in a positive territory for first time post 2011 Order finalization during March 2013 till Feb 2014 (ttm basis) stands at INR1.9t, and is up 18% YoY. This is important as the growth number has been in the positive territory for the first time post 2011, also partly supported by the base effect. Order awards on a ttm basis have gradually inched upwards from lows of INR1.4t in June 2013 to INR1.9t currently. During February 2014, INR356b of orders have been finalized, a record level; with order awards up 170% YoY and 227% MoM in February 2014. February 2014 awards at INR356b; led by Ports / Powergen Key orders finalized in February 2014 are a) INR97b of tenders across JNPT (container terminal) and Kamarajar Ports (erstwhile Ennore) on Public Private Partnership basis b) 1GW Hydro Power order being placed with consortium of Patel Engineering - Limak - BHEL, with EPC value of INR89b c) EPC contract for Ennore thermal power plant to Lanco, 660MW, INR39.6b. Port activity continues to witness action in March, 2014 as well, with five consortiums showing interest in Vizhinjam international multipurpose seaport project Mid-sized players show report robust order inflows February 2014 includes important project wins by several players a) INR3b from state transmission companies to Bajaj Electricals Ltd b) INR5.1b order to Petron Engineering from multiple customers like BPCL, Visa Power & JBF Petrochemicals c) INR6.1b to Ashoka Builcon from Maharashtra & Karnataka d) INR8b to Sadbhav (including road BOT) e) INR11b to Supreme Infra (Buildings & Water), etc Private sector ordering remains elusive; L&T, KKC, TMX top picks for investment cycle uptick Ordering activity was limited only to PSUs, while order finalization from private sector players continues to remain elusive. For Capital Goods sector, we continue to believe that initial round of bidding may well be a winners curse. Prefer mid value product companies, which benefit from structural trends. LT, TMX and KKC are Top Picks to play the possibility of an uptick in the investment climate.