Techno Electric & Engineering Q2 Results Review - Muted Performance; May Reverse In H2: ICICI Securities
With strong order backlog, we expect execution to pick-up in H2 FY23 and in subsequent years.
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ICICI Securities Report
Techno Electric and Engineering Ltd.’s Q2 FY23 revenues declined 17% YoY to Rs 2.3 billion impacted by deferment of execution in the engineering, procurement and construction segment to H2 FY23.
Gross margin expanded by 245 bps YoY to 43.1% on account of lower raw material purchases. However, due to operating deleverage, Ebitda margin came in flat at 31.2%.
Order intake stood at Rs 4 billion, which was much lower than the Rs 19 billion in Q1 FY23.
Current orderbook grew to Rs 36 billion from Rs 32 billion at Q1 FY23-end.
Management indicated incremental order inflow of Rs 15 billion in H2 FY23 (Rs 23 billion in H1).
With strong order backlog, we expect execution to pick-up in H2 FY23 and in subsequent years. As flue gas desulfurisation and transmission ordering activity gathers pace, we expect order intake to continue the current momentum in FY23E/FY24E and thereby execution to remain healthy.
Techno Electric and Engineering has a net cash balance of Rs 12 billion. It has decided to sell ~40 mega watt of its 129 mega watt wind assets and offload the balance to a separate special purpose vehicle. This is expected to improve receivables going forward.
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