Spark Capital
Techno Electric & Engineering (Buy)
CMP: ₹322.95
Target: ₹404
We expect Techno Electric & Engineering's revenue to grow by 19 per cent y-o-y in FY15 driven by strong growth in the EPC segment (24 per cent y-o-y growth). Growth in the wind power segment is expected to stagnate y-o-y (2 per cent de-growth) on the back of sub-par wind power generation during peak season.
EBITDA margin in the EPC segment is expected to increase to 12.7 per cent (vs 10.7 per cent in FY14) due to execution of certain high margin export orders (project in Uganda). It is expected to gradually expand further from FY16 as order inflow activity picks up (relatively lower competition) and foray into international markets (better execution pace/higher margins).
Order inflow in the EPC segment is expected to remain strong at ₹1,460 crore (vs ₹770 crore in FY14). The company has already secured orders worth ₹800 crore in first half of fiscal 2015 and is L1 in ₹ 250 crore worth of orders.
Healthy pace of execution and strong order inflow prospects in the EPC segment, stable cash generation from the wind power assets are the key positives.
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