Buy Techno Electric; target of Rs 435: JM Financial
JM Financial’s research report on Techno Electric
Techno Electric (TEEC)’s 2QFY18 results missed our expectations. While we were negatively surprised by the magnitude of the decline in EPC segment sales (down 32% YoY), management highlighted that revenue booking had been deliberately slowed down after GST implementation, as it awaited clarity on tax rates, besides facing a few transitionary issues. The sales decline in the wind energy segment was along expected lines due to sale of 33MW capacity in Jan’17. However, operating margins were stable despite a sharp fall in sales, due to a favourable execution mix and tight controls on fixed overheads. Given the temporary lull in T&D ordering, management has cut its annual order intake guidance to INR 12.5bn-15bn for FY18 and is focussing on reducing debt.
However, its order book for FY19 is likely to see strong growth of 50% YoY, led by SEBs, industrial segments (aluminium, oil & gas) and EPC orders for BOOT projects. We maintain BUY with an SOTP-based TP of INR 43
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