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Institutional Equities
Investment Arguments
Despite order inflow slowdown, order book-to-bill ratio at comfortable level
During FY05-11, the order book witnessed a CAGR of 39%, the order book-to-bill ratio was in the range of
3.6x-5.2x and the average was at 4.2x. During 1QFY12, the order backlog declined 4% YoY to Rs170bn.
However, the company’s current order book-to-bill ratio stands at 4.1x FY11revenue (excluding the slow
moving Sawalkot hydro-power project worth Rs17bn). Hence, we believe the order book is at a comfortable
level and augurs well for revenue visibility. Based on the pre-qualification of Rs190bn worth of projects and
visibility on some key projects, we believe the company would maintain the order book-to-bill ratio in the same
range during FY12-13.
Exhibit 6: Order book trend
(Rsbn)
250
200
150
97 93
102
100
63
54
50
40
39
20
29
20
-
188
194
181 185
164
96
61
64
51
34
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12E FY13E
Closing order Order intake
Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 7: Order book-to-bill ratio
(%)
6.0
5.2
5.0
4.9
4.9
4.4
3.8
3.9
3.9
4.0
3.0
3.6
3.3
3.5
2.0
1.0
-
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12E FY13E
Source: Company, Nirmal Bang Institutional Equities Research
Order backlog highlights:
The company has some slow-moving projects in its order kitty, which includes 1,200MW Sawalkote
hydro-power project (Rs19bn), 300MW Alaknanda hydro-power project (Rs3.3bn) and Pranahita Lift
Irrigation project (Rs12.50bn) due to delay in getting environmental clearance and also delayed payment
by the asset owner.
Some key projects where the probability of securing them is higher for the company include Hyderabad
metro rail project from L&T, Worli-Haji Ali sea link project, port projects and also orders from Nuclear
Power Corporation of India.
Exhibit 8: Segment-wise order book
Source: Company, Nirmal Bang Institutional Equities Research
70 HCC