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TRANSCRIPT
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
India Equity Research | Engineering & Capital Goods
May 12, 2020
Sector Update
Engineering & Capital Goods Refer to important disclosures at the end of this report
Apr-20: Tendering activity surprises
positively but actual awards dip further
This report is solely produced by Emkay Global. The following person(s) are responsible for the production of the recommendation:
Amar Kedia [email protected] +91 22 6624 2466
This report is a monthly update on project tendering and awarding activity in the
Infrastructure space – we assess the trends seen in April’20.
Key trends seen in April’20
Covid-19-related disruptions marred awarding activity as it fell 70% yoy in April 2020, with sharp
declines in Railways (down 44% yoy), Real Estate (down 97% yoy), Pipeline (down 81% yoy) and
Others segment (down 100% yoy). Power Equipment (up 70% yoy) and Roadways (up 49% yoy)
were the only segments that reported growth. Railways and Refineries witnessed orders worth
Rs18bn and Rs21.5bn, respectively, to L&T during the month, which we have excluded for
comparison purpose (past year’s numbers have also been adjusted for L&T order data).
The total value of tenders published in April 2020 jumped 241% yoy and 30% mom due to a low base
effect on account of ordering slowdown prior to general elections in May 2019. Tendering activity was
driven by a sharp pick-up in sectors such as Roadways (up 188% yoy), Irrigation (up 469% yoy),
Water Supply (up 2,390% yoy), Real Estate (up 722% yoy) and Water Treatment (up 1,361% yoy).
Sectors such as Community Services (down 56% yoy) and Railways (down 82% yoy) reported
declines.
Major orders finalized in April’20 include: 1) a contract worth Rs17.5bn won by Vikram Solar from
NTPC to build a 300MW solar project located in Rajasthan; 2) a contract worth Rs17.3bn won by Tata
Power Solar Systems from NTPC to build a 300MW solar project; and 3) a contract worth Rs5.9bn
won by G R Infraprojects for the construction of an elevated viaduct and 3 elevated stations of Delhi-
Gurgaon-Satnaur Badesron RRTS corridor.
With the fiscal situation of both the Centre and State governments already worsening and further
pressure likely due to the Covid-19 impact, we are now increasingly cautious on FY21 order inflows
for our coverage stocks.
Top picks from Emkay coverage
L&T: Despite worrying near-term outlook, we believe that the long-term outlook for L&T remains
promising on strong balance sheet and technical competence across segments. Past track record
suggests that L&T often gains market share in a difficult macro environment as weaker players
collapse.
Cummins India: We are structurally positive on domestic Powergen and Industrial segments, backed
by the underpenetrated power back-up market, demand visibility from metro projects, airports and
data centers.
KNR Constructions and PNC Infratech: KNR and PNC are among the few construction companies
that have maintained an asset-light approach and yet a focused strategy to bid for projects in their
geographical focus areas, thereby generating consistent OCF/FCF.
Please see our sector model portfolio (Emkay Alpha Portfolio): Engineering & Capital Goods (Page 13)
Financial Snapshot
EPS (Rs) EV/EBITDA P/E
FY20E FY21E FY20E FY21E FY20E FY21E
ABB 17.0 18.3 30.3 28.9 50.7 47.1
BHEL 0.9 1.5 2.4 0.2 26.0 15.2
Cummins India 24.0 21.1 13.7 14.6 15.4 17.5
GE T&D India (3.3) (0.1) 96.7 16.5 NM NM
Kalpataru Power 33.7 29.5 4.6 4.7 5.9 6.8
KEC International 22.9 18.3 5.0 5.4 8.6 10.8
Larsen & Toubro 65.7 60.9 14.2 14.3 12.5 13.5
Siemens 30.5 31.7 21.5 22.4 33.7 32.5
Thermax 23.2 24.0 14.7 15.5 30.6 29.6
Triveni Turbine 4.3 3.7 10.9 11.4 14.8 17.0
Source: Company, Emkay Research
Engineering & Capital Goods India Equity Research | Sector Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 12, 2020 | 2
Story in Charts
Exhibit 1: On a mom basis, total tenders published grew 30% in value terms in April’20…
Source: Projects Today, Emkay Research
Exhibit 2: … and the number of tenders published for the month fell 57% mom in April’20
Source: Projects Today, Emkay Research
Exhibit 3: On a yoy basis, the value of published tenders surged 241% on a very low base ...
Source: Projects Today, Emkay Research
Exhibit 4: …and increased 6% yoy in terms of number of tenders
Source: Projects Today, Emkay Research
Exhibit 5: The value of orders announced fell 67% mom…
Source: Projects Today, Emkay Research
Exhibit 6: …and the number of orders fell 28% mom
Source: Projects Today, Emkay Research
Exhibit 7: The value of orders announced decreased 70% yoy
Source: Projects Today, Emkay Research
Exhibit 8: In number terms, orders announced grew 55% yoy
Source: Projects Today, Emkay Research
-100
-50
0
50
100
150
0
400
800
1,200
1,600
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%Rs bn
Value of Tenders Growth MoM (RHS)
-100
-50
0
50
100
150
0
1,000
2,000
3,000
4,000
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
No. of Tenders
No Of Tenders Growth MoM (RHS)
-100
-50
0
50
100
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%Growth YoY
-90
-60
-30
0
30
60
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
% Growth YoY
-100
0
100
200
300
400
-
200
400
600
800
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
In % TermsRs bn
Value of contracts Growth Rate MoM (RHS)
-100
-60
-20
20
60
0
200
400
600
800
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%No. of
Awards
No Of Contracts Growth Rate MoM (RHS)
-100.0
0.0
100.0
200.0
300.0
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
YoY Growth %
-120.0
-80.0
-40.0
0.0
40.0
80.0
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
YoY Growth %
Engineering & Capital Goods India Equity Research | Sector Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 12, 2020 | 3
Analysis of April’20 tendering and awarding activity
Tendering activity in April’20 shows a marked improvement yoy albeit on a low base
Tendering activity in April’20 surged 241% yoy and 30% mom and was a positive surprise
given the disruptions in the economy on account of Covid-19.
However, with the fiscal situation of both the Centre and State governments already under
pressure and further worsening likely due to Covid-19, we believe that tendering and
awarding activity will remain subdued for FY21.
Key tenders published during the month were: 1) Lifting of 1.1bn cubic feet of water per
day (361 cumecs) from foreshore of SYP to Devikonda reservoir at Velgatoor village; 2)
Lifting of 333 cumecs of water from Ananthagiri reservoir to delivery Cistern at
Chinnagundavally village; and 3) Lifting of 1.1 TMC of water per day (361 cumecs) from
foreshore of Devikonda reservoir to FFC at Namapur village.
Exhibit 9: On a mom basis, total tenders published grew 30% in value terms in April’20…
Source: Projects Today, Emkay Research
Exhibit 10: … and the number of tenders published for the month fell 57% mom in April’20
Source: Projects Today, Emkay Research
Exhibit 11: On a yoy basis, the value of published tenders surged 241%...
Source: Projects Today, Emkay Research
Exhibit 12: …but increased 6% yoy in terms of number of tenders
Source: Projects Today, Emkay Research
-100
-50
0
50
100
150
0
400
800
1,200
1,600
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%Rs bn
Value of Tenders Growth MoM (RHS)
-100
-50
0
50
100
150
0
1,000
2,000
3,000
4,000
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
No. of Tenders
No Of Tenders Growth MoM (RHS)
-100
-50
0
50
100
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%Growth YoY
-90
-60
-30
0
30
60
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
% Growth YoY
Engineering & Capital Goods India Equity Research | Sector Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 12, 2020 | 4
Sector-wise breakdown of tenders
In April’20, sectors which reported strong growth in the tendering activity were Roadways (up
188% yoy), Irrigation (up 469% yoy), Water Supply (up 2,390% yoy), Real Estate (up 722% yoy)
and Water Treatment (up 1,361% yoy. In contrast, Community Services (down 56% yoy) and
Railways (down 82% yoy) were the sectors which reported declines.
Cumulatively, for TTM April’20, tendering activity saw a decline of 35%, mainly due to the fall in
major sectors such as Roadways, Irrigation, Community Services, Real Estate, Power
Distribution and Water Supply. Railways, Hospitals and Water Treatment were the sectors to
report growth in tendering activity.
Exhibit 13: Sector-wise details of tenders opened in April’20 in value terms
In Rs bn Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 % YoY TTM
Apr’19 TTM
Apr’20 % YoY
Roadways 24 131 102 64 162 154 84 232 291 276 156 68 69 188 3,231 1,790 (45)
Irrigation 46 39 9 21 113 73 34 47 78 19 24 29 260 469 904 746 (17)
Railways 70 64 54 39 47 30 87 27 78 64 113 18 13 (82) 605 633 5
Community Services 12 32 22 25 40 34 25 25 20 53 63 45 5 (56) 858 390 (55)
Water Supply 4 30 20 15 64 120 22 18 8 46 71 129 100 2,390 813 643 (21)
Real Estate 9 8 29 39 15 12 17 52 44 30 39 44 78 722 751 407 (46)
Power Distribution 2 7 5 13 16 5 14 21 9 36 6 11 10 540 333 151 (55)
Hospitals 0 2 28 14 20 57 4 24 29 27 26 18 1 219 241 251 4
Water Treatment 1 5 3 3 2 8 2 1 2 5 11 63 14 1,361 104 121 16
Total 176 330 288 262 547 518 314 471 576 659 557 465 603 241 8,590 5,589 (35)
Growth YoY (%) (66) (38) (56) (64) 4 (18) (62) (2) (36) (37) (54) (48) 241
Source: Projects Today, Emkay Research
Exhibit 14: Sector-wise details of tenders opened in April’20 in number terms
In Numbers Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 % YoY TTM
Apr’19 TTM
Apr’20 % YoY
Roadways 197 334 419 423 353 380 296 413 377 991 533 400 212 8 11,306 5,131 (55)
Irrigation 17 79 85 62 59 88 43 84 77 174 208 162 76 347 2,191 1,197 (45)
Railways 244 289 209 163 124 121 119 135 106 113 92 57 45 (82) 1,882 1,573 (16)
Community Services 79 269 262 206 293 227 206 243 160 553 671 439 95 20 4,228 3,624 (14)
Water Supply 30 107 193 106 114 118 107 127 92 265 237 220 93 210 4,811 1,779 (63)
Real Estate 29 52 69 64 73 78 69 105 36 118 135 99 58 100 1,366 956 (30)
Power Distribution 38 111 119 141 160 88 109 150 102 154 85 112 42 11 2,250 1,373 (39)
Hospitals 3 29 28 41 42 41 64 84 39 66 148 60 23 667 951 665 (30)
Water Treatment 14 38 48 42 41 34 28 32 36 51 58 38 13 (7) 707 459 (35)
Total 762 1,510 1,685 1,485 1,514 1,422 1,238 1,592 1,213 2,792 2,545 1,885 808 6 33,773 19,689 (42)
Growth YoY (%) (72) (49) (51) (54) (51) (53) (57) (50) (64) (8) (15) 4 6
Source: Projects Today, Emkay Research
Engineering & Capital Goods India Equity Research | Sector Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 12, 2020 | 5
Exhibit 15: Breakdown of the number of tenders in Mar’19
Source: Projects Today, Emkay Research
Exhibit 16: Breakdown of the number of tenders in April’20
Source: Projects Today, Emkay Research
Exhibit 17: Roadways – the value of tenders grew 188% yoy and 2% mom
Source: Projects Today, Emkay Research
Exhibit 18: Roadways – the number of tenders grew 8% yoy but fell 47% mom
Source: Projects Today, Emkay Research
Exhibit 19: Railways – the value of tenders fell 82% yoy and 28% mom
Source: Projects Today, Emkay Research
Exhibit 20: Railways – the number of tenders decreased 82% yoy and 21% mom
Source: Projects Today, Emkay Research
Exhibit 21: Real Estate – the value of tenders surged 722% yoy and 77% mom
Source: Projects Today, Emkay Research
Exhibit 22: Real Estate – the number of tenders grew 100% yoy but fell 41% mom
Source: Projects Today, Emkay Research
Roadways30%
Irrigation3%
Railways38%
Community Services
12%
Water Supply
5%
Real Estate4%
Power Distribution
6%Hospitals
0%
Water Treatment
2%
Roadways32%
Irrigation12%
Railways7%
Community Services
14%
Water Supply14%
Real Estate9%
Power Distribution
6%Hospitals4%
Water Treatment
2%
-100
-50
0
50
100
150
200
250
0
250
500
750
1,000
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
Rs bn
Roadways Growth YoY (RHS)
-100
-25
50
125
200
0
300
600
900
1200
1500
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%No. of Tenders
Roadways Growth YoY (RHS)
-100
-50
0
50
100
150
200
0
40
80
120
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
Rs bn
Railways Growth YoY (RHS)
-100
-50
0
50
100
150
200
250
0
50
100
150
200
250
300
350
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%No. of Tenders
Railways Growth YoY (RHS)
-100
300
700
1100
0
50
100
150
200
250
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
Rs bn
Real Estate Growth YoY (RHS)
-100
-25
50
125
200
0
100
200
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%No. of Tenders
Real Estate Growth YoY (RHS)
Engineering & Capital Goods India Equity Research | Sector Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 12, 2020 | 6
Exhibit 23: Irrigation – the value of tenders jumped 469% yoy and 785% mom
Source: Projects Today, Emkay Research
Exhibit 24: Irrigation – the number of tenders grew 347% yoy but fell 53% mom
Source: Projects Today, Emkay Research
Exhibit 25: Water Supply – the value of tenders surged 2,390% yoy but fell 22% mom
Source: Projects Today, Emkay Research
Exhibit 26: Water Supply – the number of tenders increased 210% yoy but fell 58% mom
Source: Projects Today, Emkay Research
Exhibit 27: Water Treatment – the value of tenders grew 1,361% yoy but fell 77% mom
Source: Projects Today, Emkay Research
Exhibit 28: Water Treatment – the number of tenders fell 7% yoy and 66% mom
Source: Projects Today, Emkay Research
Exhibit 29: Power Distribution – the value of tenders grew 540% yoy but fell 12% mom
Source: Projects Today, Emkay Research
Exhibit 30: Power Distribution – the number of tenders grew 11% yoy and 63% mom
Source: Projects Today, Emkay Research
-100
0
100
200
300
400
500
0
50
100
150
200
250
300
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
Rs bn
Irrigation Growth YoY (RHS)
-100
-25
50
125
200
275
350
425
0
50
100
150
200
250
300
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%No. of Tenders
Irrigation Growth YoY (RHS)
-500
0
500
1000
1500
2000
2500
3000
0
40
80
120
160
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%Rs bn
Water & Sewerage Pipeline & Distribution Growth YoY (RHS)
-100
0
100
200
300
0
250
500
750
1,000
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
No. of Tenders
Water & Sewerage Pipeline & Distribution Growth YoY (RHS)
-150
250
650
1050
1450
0
20
40
60
80
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
Rs bn
Water, Sewage & Effluent Treatment Growth YoY (RHS)
-100
-50
0
50
100
0
25
50
75
100
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%No. of Tenders
Water, Sewage & Effluent Treatment Growth YoY (RHS)
-100
0
100
200
300
400
500
600
0
20
40
60
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%Rs bn
Power Distribution Growth YoY (RHS)
-100
-25
50
125
200
0
100
200
300
400
500
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%No. of Tenders
Power Distribution Growth YoY (RHS)
Engineering & Capital Goods India Equity Research | Sector Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 12, 2020 | 7
Exhibit 31: Major tenders published in April’20
Issuer Name Value
(Rs bn) Industry Scope of Work
Completion (Months)
Irrigation & CAD Department, Telangana
62 Irrigation Lifting of 1.1 thousand million cubic feet (TMC) of water per day (361 cumecs) from foreshore of SYP to Devikonda reservoir at Velgatoor village
24
Irrigation & CAD Department, Telangana
61 Irrigation Lifting of 333 cumecs of water from Ananthagiri reservoir to delivery Cistern at Chinnagundavally village
0
Irrigation & CAD Department, Telangana
33 Irrigation Lifting of 333 cumecs of water from Mid Manair Reservoir to Ananthagiri Reservoir at Kaleshwaram Project
24
Irrigation & CAD Department, Telangana
31 Irrigation Additional 1.1 TMC-drawl and lifting of 1.1 TMC of water per day (361 cumecs) from foreshore of Devikonda reservoir to FFC at km 95 at Namapur village
24
Irrigation & CAD Department, Telangana
26 Irrigation Construction of barrage with radial gate, hoisting arrangements across Godavari River downstream of existing Dummugudem anicut near Ammagaripalli village
24
Central Coalfields Ltd. 20 Coal Development & operationalization of kotre basantpur pachmo ocp for 25 years in mdo mode at West Bokaro Coalfileds
0
Irrigation & CAD Department, Telangana
16 Irrigation Lifting of 333 cumecs of water from forebay at Tukkapur to Sri Komuravelli Mallanna Sagar for Kaleshwaram project parallel conveyor system
24
NBCC (India) Ltd. 14 Real Estate Construction/ rectification of balance works/ left out works of Dream Valley, Phase-2 at Plot No. GH-09, Tech Zone-IV in Greater Noida.
36
NBCC (India) Ltd. 11 Real Estate Construction/rectification of balance works/ left out works of Leisure Valley-Verona Height at Plot No. GH-02, Tech Zone-IV, Greater Noida.
36
National Highways Authority of India
9 Roadways Construction of 4 lane expressway from start of DSIR Zone of Ahmedabad district to Adhelai Village of Bhavnagar district
24
National Highways Authority of India
9 Roadways Construction of four lane expressway from Sindhrej Village to Vejalka Village from km 22 to 48 of Ahmedabad-Dholera Greenfield Alignment (NH-751)
24
National Highways Authority of India
8 Roadways Construction of four lane expressway from Sardar Patel Ring Road to Sindhrej Village from km 0 to km 22 of Ahmedabad-Dholera Greenfield Alignment (NH-751).
24
Municipal Corpn. of Greater Mumbai
8 Water, Sewage & Effluent Treatment
Designing, providing, constructing and commissioning modernized & fully automated package/ modular sewage treatment plant along Poisar River in Mumbai Suburban.
36
National Highways Authority of India
7 Roadways Construction of four lane expressway from Vejalka Village to Start of DSIR Zone from km 48 to 71 of Ahmedabad-Dholera Greenfield Alignment
24
Transmission Corpn. of Telangana Ltd.
7 Power Distribution Supply, erection, testing and commissioning of 400/220/132kV Choutuppal substation.
18
NBCC (India) Ltd. 7 Real Estate Construction/rectification of balance works/left out works of Centurian Park -Terrace Home & Tropical Garden at Plot No. in GH-05, Tech Zone-IV, Greater Noida West.
36
Uttar Pradesh State Water & Sanitation Mission
7 Water & Sewerage Pipeline & Distribution
Construction of pipe water supply for Jhilo and Bijpur group of villages in Sonbhadra district.
24
Irrigation & CAD Department, Telangana
7 Irrigation Excavation of Gravity Canal from km 0 to 15 to carry 333 cumecs discharge of water at Chinnagundevelly village to Fore Bay
24
Public Works Department, Tamil Nadu
7 Roadways Initial rectification widening, strengthening, improvements in state highways & major district roads for Length of 371 km in Kumbakonam, Thiruvidaimaruthur.
0
NBCC (India) Ltd. 6 Real Estate Construction/ rectification of balance works/left out works of Golf Homes on as is where basis at Plot No - 02, Sector-4, Greater Noida.
36
Source: Projects Today, Emkay Research
Engineering & Capital Goods India Equity Research | Sector Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 12, 2020 | 8
Awarding activity dips further on Covid-19-related disruptions
The awarding activity in April’20, in value terms, declined 70% yoy, while the number of
orders in April’20 grew 55% yoy.
Major orders finalized in April'20 include: 1) a contract worth Rs17.5bn won by Vikram Solar
from NTPC to build a 300MW solar project located in Rajasthan; 2) a contract worth
Rs17.3bn won by Tata Power Solar Systems from NTPC to build a 300MW solar project;
and 3) a contract worth Rs5.9bn won by G R Infraprojects for the construction of elevated
viaduct from IDPL Complex to Rajiv Chowk & 3 elevated stations viz. Udyog Vihar, Sector-
17 and Rajiv Chowk of Delhi- Gurgaon-Satnaur Badesron RRTS corridor.
For yoy comparison, we have adjusted the awarding data (in value terms) for FY19 for
exclusion of orders awarded to L&T as it has stopped reporting it from April’19.
Exhibit 32: The value of orders announced fell 67% mom…
Source: Projects Today, Emkay Research
Exhibit 33: …and the number of orders fell 28% mom
Source: Projects Today, Emkay Research
Exhibit 34: The value of orders announced decreased 70% yoy
Source: Projects Today, Emkay Research
Exhibit 35: In number terms, orders announced grew 55% yoy
Source: Projects Today, Emkay Research
-100
0
100
200
300
400
-
200
400
600
800
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
In % TermsRs bn
Value of contracts Growth Rate MoM (RHS)
-100
-60
-20
20
60
0
200
400
600
800
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%No. of
Awards
No Of Contracts Growth Rate MoM (RHS)
-100.0
0.0
100.0
200.0
300.0
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
YoY Growth %
-120.0
-80.0
-40.0
0.0
40.0
80.0
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
YoY Growth %
Engineering & Capital Goods India Equity Research | Sector Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 12, 2020 | 9
Sector-wise award breakdown
TTM April’20 order finalization declined 44% and was spread across all major sectors,
except for Pipeline (up 32% yoy) and Power Equipment (up 53% yoy).
For April’20, sectors which reported steep declines were Railways (down 44% yoy), Real
Estate (down 97% yoy), Pipeline (down 81% yoy) and other segments (down 66% yoy). In
contrast, Roadways (up 49% yoy) and Power Equipment (up 70% yoy) reported robust
growth during the month.
Exhibit 36: Sector-wise details of project awards
In Rs bn Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 % YoY TTM Apr’19 TTM Apr’20 % YoY
Roadways 4 3 9 8 25 17 28 128 12 11 31 84 5 49 1,112 363 (67)
Power Distribution 2 2 0 0 8 10 4 9 12 5 2 2 0 (100) 175 53 (70)
Power Equipment 24 0 35 22 25 21 72 23 61 31 11 29 40 70 242 371 53
Railways 11 13 5 12 31 35 12 73 20 25 19 7 6 (44) 375 259 (31)
Real Estate 8 10 17 8 8 72 15 18 4 17 23 10 0 (97) 301 202 (33)
Process 3 1 3 3 3 1 3 4 7 5 4 2 3 (0) 60 39 (34)
Pipeline 4 2 21 0 2 - 3 1 3 1 0 6 1 (81) 31 41 32
Infrastructure 0 2 0 - 1 - 3 0 10 0 7 6 - (100) 84 29 (65)
Water Supply - 1 17 13 1 3 3 12 6 6 4 14 2 NA 130 81 (38)
Irrigation - 0 78 9 11 11 8 1 3 1 35 7 0 NA 183 163 (11)
Mining - - - 3 - - - 0 0 - - - - NA - 4 NA
Others 134 6 18 4 40 58 13 12 16 15 5 6 0 (100) 535 193 (64)
Total 189 41 203 92 155 230 166 281 153 117 142 172 58 (69) 3,229 1,810 (44)
Growth YoY (%) (45) (84) (44) (76) (60) 53 (55) 3 (37) (45) (15) (26) (69)
Source: Projects Today, Emkay Research
Exhibit 37: Project awards in Mar’19
Source: Projects Today, Emkay Research
Exhibit 38: Project awards in April’20
Source: Projects Today, Emkay Research
Exhibit 39: Roadways – order finalization was up 49% yoy but fell 94% mom
Source: Projects Today, Emkay Research
Exhibit 40: Railways – order finalization was down 44% yoy and 8% mom
Source: Projects Today, Emkay Research
Roadways2%
Power Distribution
1%Power
Equipment12%
Railways6%
Real Estate4%
Process2%
Infrastructure…
Water0%Irrigation
0%
Others71%
Roadways9%
Power Equipment
69%
Railways11%
Real Estate0%
Process5%
Water4%Irrigation
0%
Mining0%
Others1%
-100
100
300
500
0
100
200
300
400
500
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%Rs bn
Roadways YoY - Growth (RHS)
-150
200
550
900
1250
0
20
40
60
80
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%Rs bn
Railways YoY - Growth (RHS)
Engineering & Capital Goods India Equity Research | Sector Update
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May 12, 2020| 10
Exhibit 41: Water supply – order finalization was down 85% mom
Source: Projects Today, Emkay Research
Exhibit 42: Irrigation – order finalization fell 99% mom
Source: Projects Today, Emkay Research
Exhibit 43: Real Estate – order finalization fell 97% yoy and 98% mom
Source: Projects Today, Emkay Research
Exhibit 44: Process – order finalization was flat yoy but grew 28% mom
Source: Projects Today, Emkay Research
Exhibit 45: Power Distribution – order finalization fell almost 100% both yoy and mom
Source: Projects Today, Emkay Research
Exhibit 46: Power Equipment – order finalization increased 70% yoy and 37% mom
Source: Projects Today, Emkay Research
-150
200
550
900
0
5
10
15
20
25
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%Rs bn
Water YoY - Growth (RHS)
-5000
0
5000
10000
15000
20000
0
20
40
60
80
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
Rs bn
Irrigation YoY - Growth (RHS)
-1000
500
2000
3500
5000
0
50
100
150
200
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
Rs bn
Real Estate YoY - Growth (RHS)
-150
-50
50
150
250
0
10
20
30
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
Rs bn
Process YoY - Growth (RHS)
-150
-50
50
150
250
350
0
20
40
60
80
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%
Rs bn
Power Distribution YoY - Growth (RHS)
-200
800
1800
2800
0
40
80
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
%Rs bn
Power Equipment YoY - Growth (RHS)
Engineering & Capital Goods India Equity Research | Sector Update
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May 12, 2020| 11
Exhibit 47: Major orders awarded in April’20
Awardee Value
(Rs bn) Scope of Work
Completion (Month)
Vikram Solar Ltd. 17.5 Vikram Solar bagged a contract from NTPC for a 300 MW solar plant project located in Rajasthan. 0
Tata Power Solar
Systems Ltd. 17.3
Tata Power Solar Systems bagged a contract from NTPC to build the 300 MW solar project under
the CPSU-II. 18
G R Infraprojects Ltd. 5.9
G R Infraprojects bagged a contract for construction of elevated viaduct from end of the ramp at
IDPL Complex to start of the ramp at Rajiv Chowk & 3 elevated stations viz. Udyog Vihar, Sector-17
and Rajiv Chowk of Delhi-Gurgaon-Satnaur Badesron RRTS corridor.
0
BEML Ltd. 4.0
BEML bagged a contract for supply of 7 150-T dumpers and 8 190-T dumpers under trial cum sale
along with 8 years spare parts. These dumpers will be deployed at SECL Gevra Project and M/s
NCL Amlohri and Nigahi Projects, respectively.
0
ABB Power Products &
Systems India Ltd. 1.7
ABB Power bagged a contract from Indian Oil Corporation to ensure reliable grid connection at its
Barauni Refinery in Bihar. 0
Prakash Asphaltings &
Toll Highway India Ltd. 1.2
Prakash Asphaltings & Toll Highway India bagged a contract for collection of user through user fee
collecting agency at 11 toll plazas of Kundli Manesar Palwal Expressway in Haryana. 6
GPT Infraprojects Ltd. 1.1 GPT Infraprojects bagged a contract for widening to 2 lane with hard shoulder of Churachandpur to
Tuivai section of NH 102B in Manipur on EPC basis under Bharatmala. 0
Devendra Construction
Co. 1.0
Devendra Construction Co., bagged a contract for design & build drinking water supply system
including water treatment plant at Chawinda Kalan village, Chogawan block of output capacity of 22
MLD to various villages of block Chogawan, Ajnala, Harsha, Chhina & Attari in Amritsar district of
Punjab on DBOT basis and operation & maintenance of 10 years after commissioning.
30
VA TECH Hydro India
Pvt.Ltd. 0.9
VA TECH Hydro India bagged a contract for operation, maintenance and management of the
Madinat Salman Sewage Treatment Plant and Long Sea Outfall for a period of 5 years in Kingdom
of Bahrain.
0
Indian Oil Petronas Pvt.
Ltd. 0.8
Indian Oil Petronas bagged an operation and maintenance contract at Banka LPG Bottling Plant on
leave and license model. 60
Nasim Ahsan
Construction Pvt. Ltd. 0.5
Nasim Ahsan Construction bagged a contract for dismantling of 22 vertical tanks of different
capacities construction of 4 new tanks including the allied civil, mechanical & electrical &
instrumentation jobs in connection with BR-9 project at Barauni Refinery of IOCL, Barauni in
Begusarai district of Bihar.
0
Sai Engineering
Foundation 0.5
Sai Engineering Foundation bagged a contract for upgrade of road stretch from Panol-Jhandutta
Nand-Nagroun Road and construction of bridge at Nand-Nagroun on Govind Sagar lake in Himachal
Pradesh under CRF.
24
Sainik Mining & Allied
Services Ltd. 0.3
Sainik Mining & Allied Services bagged a contract for hiring of pay loaders for mechanical transfer of
coal into railway wagons of Bhubaneswari OCP, Jagannath Area, MCL. 36
Kirloskar Pneumatic Co.
Ltd. 0.3
Kirloskar Pneumatic Co., bagged a contract for supply, installation, commissioning of one no. of new
complete reciprocating natural gas compressor package on lump sum turnkey basis at existing
compressor station of M/s DNP Ltd., at Madhuban, Duliajan.
14
N. C. Paul & Co. 0.3
N. C. Paul & Co., bagged a contract for contractual loading and transportation of 35 LTe Coal from
MIC unit and 3 and 4 incline unit to POCP siding I and II during the period of FY20-21 under Jhanjra
Project Colliery, Jhanjra.
12
Source: Projects Today, Emkay Research
Engineering & Capital Goods India Equity Research | Sector Update
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May 12, 2020| 12
Exhibit 48: Peer comparison
Companies Price (Rs)
Mkt Cap (Rs bn)
Reco Target
Price (Rs)
PE (x) PB (x) ROE (%)
FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E
ABB 864 192 SELL 791 50.7 47.1 37.7 5.1 4.7 4.3 9.5 10.4 12.0
BHEL 22 77 BUY 37 26.0 15.2 8.3 0.3 0.3 0.3 1.0 1.7 3.0
Cummins India 370 100 BUY 511 15.4 17.5 13.8 2.4 2.3 2.2 15.8 13.3 16.3
GE T&D India 72 22 HOLD 85 NA NA 14.2 1.4 1.5 1.4 -6.3 -0.2 10.3
Kalpataru Power 200 27 HOLD 198 5.9 6.8 7.9 0.8 0.8 0.7 15.3 11.9 9.3
KEC International 198 40 HOLD 175 8.6 10.8 7.9 1.7 1.5 1.3 21.9 15.0 17.8
KNR Construction 188 26 BUY 256 10.8 10.7 6.6 1.6 1.4 1.2 16.0 14.0 19.3
Larsen & Toubro 822 1,214 BUY 1,127 12.5 14.0 10.2 1.7 1.6 1.4 12.9 10.7 13.4
PNC Infratech 107 29 BUY 151 6.2 10.2 6.3 1.1 1.0 0.8 19.1 10.0 14.2
Siemens 1,030 421 SELL 920 33.7 32.5 29.7 4.1 3.7 3.4 12.5 11.9 12.0
Thermax 710 79 SELL 600 30.6 29.6 23.7 2.5 2.4 2.2 8.4 8.3 9.8
Triveni Turbine 64 21 BUY 93 14.8 17.0 13.8 3.9 3.5 3.0 29.0 21.6 23.5
Source: Emkay Research
Engineering & Capital Goods India Equity Research | Sector Update
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May 12, 2020| 13
Emkay Alpha Portfolio – Engineering & Capital Goods
EAP sector portfolio
Company Name BSE200 Weight
EAP Weight
OW/UW (%)
OW/UW (bps)
EAP Weight (Normalised)
Engineering & Capital Goods 2.45 2.39 -2% -5 100.00
ABB 0.00 0.00 NA 0 0.00
BHEL 0.06 0.11 88% 5 4.57
Cummins India 0.10 0.12 23% 2 5.10
GE T&D India 0.00 0.00 NA 0 0.00
Kalpataru Power 0.00 0.00 NA 0 0.00
KEC International 0.00 0.07 NA 7 2.81
KNR Constructions 0.00 0.06 NA 6 2.36
Larsen & Toubro 2.04 1.94 -5% -10 79.46
PNC Infratech 0.00 0.04 NA 4 1.79
Siemens 0.19 0.00 -100% -19 0.00
Thermax 0.06 0.00 -100% -6 0.00
Triveni Turbine 0.00 0.04 NA 4 1.79
Cash 0.00 0.05 NA 5 2.12
Source: Emkay Research
* Not under coverage: Equal Weight
High Conviction/Strong Over Weight High Conviction/Strong Under Weight
Sector portfolio NAV
Base Latest
1-Apr-19 9-Aug-19 11-Nov-19 10-Feb-20 9-Apr-20 11-May-20
EAP - Engineering & Capital Goods 100.0 100.8 103.1 93.9 61.2 62.2
BSE200 Neutral Weighted Portfolio (ETF) 100.0 96.2 100.2 90.3 58.2 58.2
*Performance measurement base date 1st April 2019
Source: Emkay Research
NAV chart
Source: Emkay Research
Please see our model portfolio (Emkay Alpha Portfolio): SMID
Please see our model portfolio (Emkay Alpha Portfolio): Nifty
“Emkay Alpha Portfolio – SMID and Nifty are a supporting document to the Emkay Alpha
Portfolios Report and is updated on regular intervals”
50
64
78
92
106
120
Apr-19 May-19 Jul-19 Aug-19 Oct-19 Dec-19 Jan-20 Mar-20 May-20
NAV
EAP - Engineering & Capital Goods BSE200 Neutral Weighted Portfolio (ETF)
Analyst: Amar Kedia
Contact Details
+91 22 6624 2466
Sector
Engineering & Capital Goods
Analyst bio
Amar Kedia holds a Post Graduate
Diploma in Management from IIM
Lucknow and comes with a cumulative 15
years of research experience. His team
currently covers 14 stocks in the Indian
Engineering and Capital Goods sector.
Engineering & Capital Goods India Equity Research | Sector Update
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May 12, 2020| 14
Emkay Rating Distribution
Ratings Expected Return within the next 12-18 months.
BUY Over 15%
HOLD Between -5% to 15%
SELL Below -5%
Completed Date: 12 May 2020 22:44:11 (SGT) Dissemination Date: 12 May 2020 22:45:11 (SGT)
Sources for all charts and tables are Emkay Research unless otherwise specified.
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Engineering & Capital Goods India Equity Research | Sector Update
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May 12, 2020| 15
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Engineering & Capital Goods India Equity Research | Sector Update
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May 12, 2020| 16
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Emkay Global Financial Services Ltd.
CIN - L67120MH1995PLC084899
7th Floor, The Ruby, Senapati Bapat Marg, Dadar - West, Mumbai - 400028. India
Tel: +91 22 66121212 Fax: +91 22 66121299 Web: www.emkayglobal.com