NTPC bulk tender saw 5 bids each in boiler, where only 2 bidders can win orders and TG, where 3 bidders can win including Bhel. In boilers, Doosan was the new entrant, while Ansaldo exited on its rift with NTPC, sealing its fortunes.
We see intense competition among non-Bhel bidders as fortunes of Doosan and Thermax in boiler and BGR in B&TG, will be sealed based on their ability to win orders here. Bids now go for technical qualifications. Bhel could win orders for minimum 4 and maximum 5 B&TG worth R8,800-11,000 crore (12-15% of FY12E Inflows). Buy Bhel on visibility of 22% EPS CAGR over FY11-13E with a backlog at 3.4x FY12E sales and improved competitiveness, trading at 11.6x our FY13E.
NTPC likely to award 800mw bulk order worth R18,000 crore for its 3x800mw Kudgi, 2x800mw Lara, 2x800mw Darlipalli and 2x800mw Gajmara power projects, by 3QFY12. If Bhel is lowest bidder (L1), it may get orders for 5 (boiler)/5 (TG)x800mw but if it is L2/L3, as per the tender, it would still win orders for 4 (boiler)/4(TG) sets at L1 price. This would add visibility of 12-15% of FY12E order inflows. Boiler tender received bids from Bhel, Doosan, BGR-Hitachi (BGRH), L&T-MHI and Thermax-Babcock (TBW). Turbine-Generator (TG) tender was bid by Bhel, BGRH, L&T-MHI, Bharat Forge-Alstom (BFA) and JSW-Toshiba.
Bhel booked 40% of its FY11 inflows in Q4 despite slippage of R12,500 crore (21% of inflows) to FY12E. This validates our thesis of acceleration in inflows during Q4FY11 despite weak sentiments towards capex, based on our on-ground research.
This helped Bhel grow backlog 14%y-o-y despite market concerns of rising competition, weak SEB finances and coal shortages impacting the same. In the 6th year of Chinese competition, Bhel?s FY11 EBITDA margins expanded 197bps on 199bps fall in employee, which was commendable.
?BOAML