GEI Industrial Systems up 11%
Srujani Panda / 10 Oct 2011
According to sources, GEI, a leader in heat transfer technology for more than 40 years and specializing in the design, manufacture, fabrication, testing, and erection & commissioning of Air Cooled Heat Exchangers for Oil, Gas and Power sector and Air Cooled Vacuum Steam Condensers for Steam Turbine Power Plants may announce that it has received an order worth Rs 60 crore today. The details of the deal are still not available. However the stock is up by 11 per cent.
We at DSIJ have observed that with the receipt of this order the company’s order book will now stand at Rs 460 crore i.e. 1.27x its FY11 revenue providing a decent revenue visibility for 1-2 years. With this the management’s order book guidance of Rs 500 for FY12E looks like an optimistic one.
Moreover, the power sector contributes a major portion of the order book amounting to 60 per cent. Due to the ongoing scarcity of water for cooling towers in power plants, we expect the air based cooling systems would substitute them as it is more cost-effective and an efficient substitute. This would further boost GEI’s revenue visibility as it has a monopolistic edge in this space.
The company has also just recently increased its installed capacity from 1000 MW to 3000 MW at a total capex of Rs 55 crore. The company further plans to increase it to 5000 MW by Q3FY13. These newly added capacities would enable the company to efficiently serve the needs of the various infra related sectors and help it to bid for more projects thereby improving its order book size.
On the financial front the company has posted a good 25 per cent and 15 per cent growth in its top-line and bottom-lines respectively on a YoY basis in Q1FY12. However on a QoQ basis the top-line was down by 44 per cent and bottom-line down by 18 per cent. But such has been the performance by most of the EPC companies thanks to the global economic scenario and our own macro economic concerns.
In conclusion, backed by a monopolistic position in the air based cooling space, on track expansion plans and coupled with robust order backlog providing decent revenue visibility and a growing demand for its products and services we believe that this new order receipt will auger very well for the company.
We at DSIJ have observed that with the receipt of this order the company’s order book will now stand at Rs 460 crore i.e. 1.27x its FY11 revenue providing a decent revenue visibility for 1-2 years. With this the management’s order book guidance of Rs 500 for FY12E looks like an optimistic one.
Moreover, the power sector contributes a major portion of the order book amounting to 60 per cent. Due to the ongoing scarcity of water for cooling towers in power plants, we expect the air based cooling systems would substitute them as it is more cost-effective and an efficient substitute. This would further boost GEI’s revenue visibility as it has a monopolistic edge in this space.
The company has also just recently increased its installed capacity from 1000 MW to 3000 MW at a total capex of Rs 55 crore. The company further plans to increase it to 5000 MW by Q3FY13. These newly added capacities would enable the company to efficiently serve the needs of the various infra related sectors and help it to bid for more projects thereby improving its order book size.
On the financial front the company has posted a good 25 per cent and 15 per cent growth in its top-line and bottom-lines respectively on a YoY basis in Q1FY12. However on a QoQ basis the top-line was down by 44 per cent and bottom-line down by 18 per cent. But such has been the performance by most of the EPC companies thanks to the global economic scenario and our own macro economic concerns.
In conclusion, backed by a monopolistic position in the air based cooling space, on track expansion plans and coupled with robust order backlog providing decent revenue visibility and a growing demand for its products and services we believe that this new order receipt will auger very well for the company.
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