Company: Areva T&D India Ltd.
Industry: Power – Transmission/Equipment
CMP and PE Ratio: Rs. 177.2 with a PE ratio of 18.7
Peer Companies for Areva T&D India Ltd: Jyoti Structures Ltd, KEC International Ltd, Alstom Projects India Ltd and Kalpataru Power Transmissions Ltd.Financial Analysis:
- Income Statement - Areva T&D has shown robust revenue growth in the past five years with the FY 07 EPS of the company at Rs. 9.47. The gross profit margin, operating margin and net profit margin have also been on an uptrend except for FY 07, where margins got hit due to higher expenses. For the first nine months of the current fiscal also the topline has grown while bottom line has suffered.
- Cash Flow - The company has got a decent cash flow position with positive operating cash flows in the past 5 years. At the end of FY 07 the company had a cash and cash equivalent of Rs. 22.35 Crores.The adjusted cash EPS for the company as on 31st December 2007 stood at Rs. 50.1, which is very healthy.
- Balance Sheet – The balance sheet for Areva also looks healthy with good and a very decent long term debt equity ratio of 0.18. The book value per share as on 31st December 2007 for the company stood at Rs. 114.9.
Business Analysis:
- Power transmission is mainly related with bringing electricity from the source onto the transmission network. The main contributers of revenue for Areva T&D as on 31st December 2007 were Project Items (35.26% revenue), Switchgear Of All Types (28.06% revenue) and Transformers & Reactors (24.03% revenue).
- The long term business prospects for the company are good as the power equipment business largely depends on the economic activity and its robustness. So the next 1-2 years might be difficult for the company but once the economy picks up robust revenue growth will again be seen.
This industry has a lot of players and investors should make it a point to do a peer analysis before investing in any of the companies for long term. In my opinion Areva T&D India Ltd. will see more attractive buying levels within the next one year. So if i had to buy this stock for long term I would wait for more downside. The current PE is high, especially when earnings are going down. So forward PE will be even higher and this should ideally lead to the stock correcting even more.
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