Goldman Sachs has upgraded Thermax to neutral from sell with a 12-month target price of Rs 813, based on trading at around 17 times the FY15 estimated earnings.
GS views Thermax's order book will see a revival going into FY15-18e. It expects the company's captive power plant cycle to pick up in 12 months and sales CAGR of 18 percent in FY14-FY18 versus 1percent over FY11-14e – driven by pick up in large cycle power orders (a probable pick up in the capex post elections).
Also Read: New govt must ensure more investor-friendly norms: Thermax
MS Unnikrishnan, MD & CEO, Thermax, says though he sees sectoral improvements, purely based on capacity utilization in the country, one should not expect anything dramatic overnight after the elections.
He thinks it will be a challenging task for the new government to revive the power sector, which is the most complicated of all sectors.
He says there are many reasons behind it like the new land acquisition bill, which when gets fully operative, will increase the cost of land by around 4-5 times. This can lead to a substantial impact on the capital cost, which then would be passed on to consumers. Second, the state electricity board (SEB) loan restructuring process is yet to get completed. And of course, summer will be very critical as well.
The capital goods sector is facing concerns of receivables. Speaking on the issue, Unnikrishnan says the industry is witnessing surge in the receivables situation on two account — the projects aren't moving at the same pace as they were two years ago (slowdown). And there are customers whose balance sheets are under stress, thus affecting their ability to generate cash and pay for current projects.
Referring to Thermax's case, he says the company is able to manage its balance sheet "slightly at a deviation to the conventional practice". He says that despite having orders in hand, Thermax has regulated the execution of the projects in such a way that the cash flow and the project execution are almost going at the same pace.
"There's no debt in the company and our borrowings are very limited so we have got cash on the balance sheet available to be managing the working capital," he says, adding, "Thermax is opting for a reduction in turnover, rather than an increase (in turnover) at the cost of accounts receivables."
Below is the interview of MS Unnikrishnan, MD & CEO of Thermax with Anuj Singhal and Ekta Batra on CNBC-TV18.
Ekta: One of the reasons why Goldman Sachs has upgraded Thermax is because the belief that the orderbook will possibly see a revival going into FY15. Is that a plausible scenario according to you considering that there could be some significant pick up in the capex post elections?
A: Certainly but don't expect anything happening dramatically overnight immediately after the elections because there are sectoral improvements expected purely based on capacity utilisation of the country.
If we want to get into cement industry, the capacity utilisation is hovering between 65 percent and 75 percent. I am sure with the construction going to be catching up back, you should be seeing the cement demand increasing, National Highway Authority of India (NHAI) projects getting online and more and more highways getting constructed or maybe more contracts going to be happening, execution be seeing. The demand for cement surging little closer to maybe 90 percent, which is in my opinion the inflection point where the current capacities need to be upgraded. So you could expect revival of that industry in the second half of the coming year.
Similarly steel industry is showing some improvement in consumption pattern and production pattern. So you could see an improvement in that area. I don't expect anything to be happened in the oil and gas sector or in the power sector substantially in the next one year. So sectorally, you may have some improvement visible in the next year however the real improvement that we are expecting is in the year after that because whatever is said and done, a new government will come in place, ministry to be formed, there afterwards they start taking actions, the parliament to be passing various policy directions, with that there could be a revival. So I am not expecting a drastic change in the coming year. However, revision or even green shoot should be visible next year. That is my assessment of the situation.
Anda sedang membaca artikel tentang
Reviving power sector a challenge for new govt: Thermax
Dengan url
https://kesehatanda.blogspot.com/2014/03/reviving-power-sector-challenge-for-new.html
Anda boleh menyebar luaskannya atau mengcopy paste-nya
Reviving power sector a challenge for new govt: Thermax
namun jangan lupa untuk meletakkan link
Reviving power sector a challenge for new govt: Thermax
sebagai sumbernya
0 komentar:
Posting Komentar