Institutional Equities - Online Share Trading
Institutional Equities - Online Share Trading
Institutional Equities - Online Share Trading
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<strong>Institutional</strong> <strong>Equities</strong><br />
Exhibit 14: EPC order book details<br />
EPC upcoming projects MW Remarks<br />
Internal projects<br />
600MW Butibori TPP 600<br />
2,400MW Samalkot power<br />
project<br />
6 x 660MW Sasan ultra mega<br />
power project<br />
Western Region strengthening<br />
project(ckm)<br />
External power projects<br />
EPC business order book at Rs 280bn<br />
The company has order book of Rs280bn in respect of its EPC arm, which is 7x FY11 EPC revenue. The<br />
order book is primarily driven by in-house orders of Reliance Power and construction work of infrastructure<br />
projects (seven power projects aggregating 9,900MW, one power transmission project of 3,285 circuit km and<br />
six road projects totaling 570km). We believe the EPC revenue is at inflexion point of growth and would show<br />
a CAGR of 50% over FY12-13. Some of the fast moving projects which would drive robust revenue growth are<br />
Samalkot and Butibori power projects, WRSS transmission project and road projects like Gurgaon-Faridabad,<br />
Jaipur-Reengus and Delhi-Agra. We expect the company to maintain its EBITDA margin of 8% in the EPC<br />
segment, driven by in-house designing, engineering capability and skilled manpower.<br />
We believe the company is currently going for in-house power and BOT projects. Going ahead, it would scale<br />
up the EPC segment by bidding for outside projects. We have valued the EPC business at 5x EV/EBITDA,<br />
which implies a valuation of Rs121/ share.<br />
80% engineering work completed, 90% of 220KV switchyard erection work completed All packages awarded and boiler drum lifting for both<br />
the units completed<br />
2,400 Major orders for gas and steam turbine, 90% packages awarded<br />
3,960 60% engineering work completed, further work stalled due to Indonesia coal price regime. Also, 20% of progress achieved in civil work<br />
3,285<br />
1,200MW Raghunathpur TPP 1,200<br />
1,200MW Rajiv Gandhi TPP* at<br />
Hisar<br />
500MW Parichha TPP* BOP<br />
package<br />
Solapur-Karad line in Maharashtra operational since February 2011. Limdi Vadavi line in Gujarat is operational since May 2011. Entire<br />
project to be commissioned in FY12<br />
Overall progress is 70% despite land acquisition delay. Boiler structure erection completed for both units of,400 KV. Switchyard in<br />
advanced stage of completion<br />
1,200 Trial run of both units completed and are under HPGCL commercial operations.<br />
500 90% progress achieved<br />
Source: Company, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
Infrastructure projects’ earnings to start gaining momentum<br />
The company has a strong infrastructure portfolio that consists of eleven road projects, three metro rail lines<br />
and five transmission projects worth Rs346bn. The execution of key infrastructure projects is on track. In the<br />
road portfolio, nine projects would be in revenue generation mode during FY12. In the metro rail portfolio, the<br />
Delhi metro is operational and Mumbai metro phase - I is likely to be commissioned by 4QFY12. In the power<br />
transmission portfolio, two lines of WRSS project have been commissioned and the full project is expected to<br />
be commissioned in FY12. We believe the company’s infrastructure portfolio is now turning from<br />
development stage to revenue generation stage.<br />
Exhibit 15: Infrastructure project portfolio<br />
Business Projects Cost (Rsbn)<br />
Road 11 120<br />
Metro rail 3 160<br />
Transmission 5 66<br />
Total 19 346<br />
Source: Company, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
Road projects: Six additional projects in revenue generation mode in FY12<br />
The company is developing eleven road projects worth about Rs120bn, of which three projects have started<br />
generating revenue and another six projects would do so in FY12. The company reported healthy revenue<br />
from toll collection of Rs1.16bn in 1QFY12 from its four road projects. We expect the revenue from road<br />
portfolio to start ramping up once heavy traffic toll projects like Delhi-Agra and Gurgaon-Faridabad get<br />
operational in FY12, followed by the four other road projects. The company also remains a beneficiary of<br />
upcoming NHAI projects, as it has achieved financial closure for all road projects. The contribution from road<br />
projects to our SOTP stands at Rs149/share. We have used the FCFE methodology to value Reliance<br />
Infrastructure’s portfolio of toll roads with a CoE of 14-16% and assuming traffic growth of 5-7%.<br />
46 Reliance Infra
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