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CLSA India Infrastructure 20190220
CLSA India Infrastructure 20190220
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Institutional Investor 2019 All-Asia Research Poll
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2.6 2.5
2.4
2.4 2.3
2.3
2.2
2.2
2.1 2.1
2.0
Mar 14
Sep14
Mar 15
Sep15
Dec15
Mar 16
Sep16
Mar 17
Sep17
Mar 18
Sep18
Dec14
Jun16
Dec16
Dec17
Dec18
Jun14
Jun15
Jun17
Jun18
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For important disclosures please refer to page 19.
India Capex Insights #18 India Infrastructure
We would like to thank Evalueserve for its help in preparing our research reports. Bhavik Mehta (IT); Kamal Verma (Banking & Financial Services); Kushal
Shah (Midcaps), Jinesh Pagaria (Capital Goods, Utilities, Power); and Suraj Yadav (Cement, Oil & Gas) provide research support services to CLSA.
Figure 1
Figure 2
Order inflow was down 15% India Capex plays: Order inflow growth in 3QFY19
in 3Q19
1,200 Domestic order inflow (Rsbn)
1,033
1,000
872
800
600
400
200
3QFY18 3QFY19
Figure 3
Figure 4
Figure 5
India Capex plays: Order backlog growth adjusting for GST impact
Even by adjusting the order Rs bn 3QFY1 3QFY19 YoY % GST % YoY
backlog of just 3 8 impact (adjusting GST
impact)
companies…
…the real pick-up was L&T (Cons) 2,707 2,840 5% 151 11%
c.16% NCC 311 337 8% 29 19%
Sadbhav 96 129 33% 13 54%
GRAND TOTAL (ex- 6,689 7,550 13% 193 16%
International)
Source: CLSA, Companies, *GST amounts are estimated based on company disclosures in previous quarters
Figure 6
25%
5%
NBCC
PNC
GE T&D
CG Power
Punj Lloyd
Kalpataru
Voltas
Dilip
Sadbhav
Inox Wind
BEML
EIL
KEC
BEL
L&T
Suzlon
Ashoka
Va Tech
Thermax
MEP
IRB
Siemens
KNR
Jkumar
NCC
HCC
Simplex
be strong for developers Sector Avg.
Figure 7
0
NBCC
PNC
BHEL
Kalpataru
CG Power
Voltas
GE T&D
KEC
Sadbhav
L&T
Dilip
EIL
BEL
INOX
IRB
Va Tech
Sector
BEML
Suzlon
Ashoka
Thermax
MEP
Siemens
KNR
HCC
NCC
Jkumar
Simplex
Punj
Figure 8
grown strongly, up 13% Developers YoY growth % (ex-int) YoY growth % (ex-GST)
21%
YoY, led by robust growth 7,500
in the non-power category 18%
9%
2,500
6%
….adjusting for GST, growth
is upwards of 16% 3%
0 0%
-3%
(2,500) -6%
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
1QFY19
2QFY19
3QFY19
Source: CLSA, Companies
Figure 9
Figure 10
Figure 11
India E&C players stock-price performance over the past six months
India mid-cap derating has
impacted E&C players… IRB Sadbhav Ashoka Dilip PNC
100
…over the past six months,
Dilip is the worst performer
- down 50%... 80
60
…IRB, Sadbhav, and Ashoka
are down 35%, 40%, and
19% respectively 40
Aug 18
Sep 18
Oct 18
Nov 18
Dec 18
Jan 19
Figure 12
India E&C company consensus EPS estimates (FY19) over past six months
L&T’s EPS has seen the 106 IRB Sadbhav PNC L&T Dilip
highest upgrade (6.5%) over
the past six months… 104
102
100
…IRB, Dilip and Sadbhav
have seen a cut of 6%, 5% 98
and 4% respectively...
96
94
1-Dec-18
8-Dec-18
6-Oct-18
2-Feb-19
9-Feb-19
16-Feb-19
10-Nov-18
17-Nov-18
24-Nov-18
15-Sep-18
22-Sep-18
29-Sep-18
13-Oct-18
20-Oct-18
27-Oct-18
3-Nov-18
15-Dec-18
22-Dec-18
29-Dec-18
5-Jan-19
12-Jan-19
19-Jan-19
26-Jan-19
Figure 13
Figure 14
10%
…developers and 5%
construction segments saw
superior growth in
execution 0%
-5%
Mar 13
Mar 14
Mar 15
Mar 16
Mar 17
Mar 18
Jun 12
Sep 12
Dec 12
Jun 13
Sep 13
Dec 13
Jun 14
Sep 14
Dec 14
Jun 15
Sep 15
Dec 15
Jun 16
Sep 16
Dec 16
Jun 17
Sep 17
Dec 17
Jun 18
Sep 18
Dec 18
Source: CLSA, Bloomberg, Companies
Figure 15 Figure 16
Dec 12
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Dec 18
Jun 12
Dec 12
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Dec 18
Source: CLSA, Bloomberg, Companies Source: CLSA, Bloomberg, Companies
Figure 17 Figure 18
25% 70%
Construction YoY Growth Developers YoY Growth
60%
20%
50%
15% 40%
10% 30%
20%
5%
10%
0%
0%
-5% -10%
Jun 12
Dec 12
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Dec 18
Jun 12
Dec 12
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Dec 18
Figure 19
…excluding this one-off CAPITAL GOODS - NON POWER 6,696 10,712 60%
loss, its Ebitda would have BEML 416 753 81%
been Rs4.3bn (ie, 44% YoY BEL 4,452 7,681 73%
increase) Sanghvi 57 244 326%
Thermax 955 1,073 12%
Titagarh 72 147 104%
Voltas 745 815 9%
Figure 20
20%
…margins are up by 10%
c.230bps…
0%
-10%
-20%
…even on an absolute basis,
-30%
Ebitda is up 43% YoY
Mar 13
Mar 14
Mar 15
Mar 16
Mar 17
Mar 18
Jun 12
Sep 12
Dec 12
Jun 13
Sep 13
Dec 13
Jun 14
Sep 14
Dec 14
Jun 15
Sep 15
Dec 15
Jun 16
Sep 16
Dec 16
Jun 17
Sep 17
Dec 17
Jun 18
Sep 18
Dec 18
Source: CLSA, Bloomberg, Companies
Figure 21 Figure 22
-60% -100%
Jun 12
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Jun 12
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Figure 23 Figure 24
45% 80%
30% 60%
15%
40%
0%
20%
-15%
-30% 0%
-45% -20%
Jun 12
Dec 12
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Dec 18
Jun 12
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Figure 25
Figure 26
Figure 27
Figure 28
0%
Jun 13
Sep 13
Jun 14
Sep 14
Jun 15
Sep 15
Jun 16
Sep 16
Jun 17
Sep 17
Jun 18
Sep 18
Dec 12
Mar 13
Dec 13
Mar 14
Dec 14
Mar 15
Dec 15
Mar 16
Dec 16
Mar 17
Dec 17
Mar 18
Dec 18
execution at MML-3)
Figure 29 Figure 30
0% 50%
0%
-50%
-197%
-50%
-100%
-100%
-150% -150%
Jun 12
Dec 12
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Dec 18
Jun 12
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Source: CLSA, Bloomberg, Companies Source: CLSA, Bloomberg, Companies
Figure 31 Figure 32
-10% 0%
-35%
-35%
-60%
-321% -284% -70% -294%
-85% -361% -116% -152%
-110% -105%
Jun 12
Dec 12
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Dec 18
Jun 12
Dec 12
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Dec 18
Figure 33
20%
...this is reflected in the
improvement in credit 15%
growth…
10%
5%
0%
…credit growth is in higher
single digits now vs lower -5%
Sep 14
Sep 15
Sep 16
Sep 17
Sep 18
Dec 13
Mar 14
Dec 14
Mar 15
Dec 15
Mar 16
Dec 16
Mar 17
Dec 17
Mar 18
Dec 18
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
single digits two years
earlier
Source: CLSA, CMIE
Figure 34
Figure 35
27
22
17
12
7
Jul 13
Jul 14
Jul 15
Jul 16
Jul 17
Jul 18
Apr 13
Apr 14
Apr 15
Apr 16
Apr 17
Apr 18
Oct 13
Jan 14
Oct 14
Jan 15
Oct 15
Jan 16
Oct 16
Jan 17
Oct 17
Jan 18
Oct 18
Jan 19
Source: CLSA
Figure 36
12.0
8.0
-1sd 7.16x
6.0
4.0
Feb 13 Feb 14 Feb 15 Feb 16 Feb 17 Feb 18
Source: CLSA
Figure 37
12.0
10.0
avg 9.51x
8.0
6.0
-1sd 5.08x
4.0
2.0
0.0
Feb 09 Feb 10 Feb 11 Feb 12 Feb 13 Feb 14 Feb 15 Feb 16 Feb 17 Feb 18
Source: CLSA
Figure 38
20.0
avg 17.99x
10.0
-1sd 6.07x
0.0
Feb 09 Feb 10 Feb 11 Feb 12 Feb 13 Feb 14 Feb 15 Feb 16 Feb 17 Feb 18
Source: CLSA
Figure 39
15.0
5.0
-1sd 3.91x
0.0
Feb 09 Feb 10 Feb 11 Feb 12 Feb 13 Feb 14 Feb 15 Feb 16 Feb 17 Feb 18
Source: CLSA
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Companies mentioned
ABB India (N-R)
Ashoka Buildcon (N-R)
BEML (N-R)
BGR Engy Sys (N-R)
Bharat Electronics (N-R)
Bharat Heavy Elec (BHEL IB - RS62.0 - SELL)
CG Power (N-R)
Dilip Buildcon (N-R)
Engineers India (N-R)
GE T&D (N-R)
Hindustan Construction (N-R)
Inox Wind (N-R)
IRB Infra (IRB IB - RS112.7 - BUY)
J Kumar Infra (JKIL IN - RS118.5 - BUY)
Kalpataru Power (N-R)
KEC Intl (N-R)
KNR Constructions (N-R)
Larsen & Toubro (LT IB - RS1,255.8 - BUY)
MEP (N-R)
Nagarjuna (NJCC IB - RS82.3 - BUY)
NBCC (N-R)
NCC (N-R)
PNC Infra (N-R)
Punj Lloyd (N-R)
Ramky (N-R)
Sadbhav (SADE IN - RS166.2 - BUY)
Sadbhav Infrastructure (N-R)
Sanghvi Movers (N-R)
Siemens India (N-R)
Simplex Infra (N-R)
Suzlon (N-R)
Thermax (N-R)
Titagarh Wagons (N-R)
VA Tech (N-R)
Voltas (VOLT IS - RS524.1 - SELL)
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is, or will be directly or indirectly related to the specific recommendation or views contained in this research
report.
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