India planning a huge capex for power generation, we frame a bullish outlook for APIL and expect it to post earnings CAGR of 43% FY07-10E. APIL will outperform on strong incremental order flow triggers. The current order book is over Rs 30bn (>2.4XFY07 revenues). APIL will to continue to post better margins and foresee the company’s RoCE & RoE improving substantially. APIL can leverage on its parent’s global leadership in integrated and hydroelectric power projects. With India set to enter a strong power generation capex cycle, this will be its key strength.
We all know the Record response Power Grid IPO received. We also know that India will spend massively in producing Electrical energy and hence stocks involved in building such mega projects will have excellent growth. A Price Objective of Rs1,079 (+38.7%) for Alstom Projects India Ltd, assigning it an exit multiple of 34X & 22X for FY09E & FY10E, respectively. Similar discounting has been assigned to Siemens and ABB stocks as well.