Power Mech Projects: Well placed backed by healthy order book

21 Feb 2024 , 12:55 PM

Powermech is well placed to deliver strong 34% revenue cagr and 45% EPS cagr over FY23-26 supported by largely ontrack execution of the Rs161bn order book and ramp up of both coking coal MDOs over FY25-26. Order inflow visibility remains strong given the focus on TPP capacity addition as well as healthy capex allocation to railways, water supply and other segments. Analysts of IIFL Capital Services remain positive on the name despite cutting EPS estimate by ~12% due to near term sluggishness seen in FGD project execution and slight delays in receipt of clearances for CCL MDO project. 

Execution largely on track for existing order book: 

Q3FY24 revenue (Rs11.1bn) growth at 21% YoY was slightly below IIFLe while Ebitda margin at 12.1% was stable. Following 9M revenue of Rs29bn, mgmt guided to FY24 revenue of Rs45-47bn. For FY25, management expects 30-35% YoY revenue growth for the core ETC/civil/O&M business supported by a healthy Rs161bn order book (ex-mining MDO). The ~Rs80bn FGD order from Adani has picked up pace but is running slower than expected given delays in permissions. 

Confident on meeting Rs100bn order inflow target: 

The company has won orders worth Rs67.7bn till date (including inflows in Q4). It is the lowest bidder for projects worth Rs17.8bn (FGD order from CESC, iRs6.5bn irrigation order and a railway project) which it is pursuing to finalise. It has also bid for projects worth Rs53bn where tenders are yet to be opened. For FY25, baring the disruption from central elections, management remains confident on sustaining order inflows from its focus segments – power generation (ETC & civil), railways, water supply, FGD, material handling among others. 

Coal MDO to ramp up over FY25-26: 

The company has started mining at the Tasra with 80kt coal excavated till date. Expected output is 300kt/1.5mt/3.5mt for FY24/25/26. For the MDO from CCL, post some delays in clearances, company expects to start mining from May24 with expected output of 0.4mt/1.6mt/3mt for FY25/26/27. Increasing contribution from MDO contracts will also push up consolidated Ebitda margins.