Looking at 60% of export sales for FY15: TD Power

TD Power Systems, the leading manufacturers of AC generators, derives around 83 percent of its revenues from domestic market and the rest from exports through their strong relationship with 60 plus OEMs, including Siemens and GE, across steam, hydro and wind asset installations.

The company has been gradually witnessing order inflow momentum in its exports business, which constitutes 33 percent of its manufacturing order book of Rs 370 crore. The stock has gained 44 percent on a YTD basis.

In an interview to CNBC-TV18, Nikhil Kumar, MD of TD Power Systems talks about the company's business outlook.

Below is the transcript of Nikhil Kumar's interview with Reema Tendulkar and Ekta Batra on CNBC-TV18.

Ekta: Can you tell us how the domestic business is doing for you, has there been any incremental pick up at this point?

A: We don't see much change in demand as of now as compared to before the elections. So we are looking at the period of before the election of 2014 and then after elections. In particular, if you look at the power sector in which we operate, there has been all the recent news especially about the coal licenses being cancelled and especially with domestic coal availability being a real issue. My feeling is the power business in India will take a little bit more time to find direction. So the domestic market will still be in limbo until then.

Reema: Can you quantify that in terms of a percentage growth and also if you could tell us a little more about the exports and the kind of growth that you are expecting there?

A: In our company, we are focusing more on exports, have been focusing more in exports over the past two years. So this year, our total sales of around Rs 600 crore, we will be looking at about 60 percent total exports as a percentage of total sales. Domestic market will be 40 percent.

For the next financial year, FY16 we are projecting about the export business to grow to 65 percent or even 67 percent and the domestic business is growing by maybe 3-4 percent. So I don't expect much growth to take place for the business for FY16 but a lot of expectation and anticipation that orders will start flowing in next year in calendar 2015 probably for execution FY17.

So that is the expectation in the market right now but I am yet to see that translate into actual demand at the ground level.

Ekta: Can you tell us about your recent facility which you all commissioned which would be for generator sets, can you tell us how much would it add in terms of volumes?

A: We recently commissioned a new plant to produce electric generators from 55 megawatt to 200 megawatt. These are larger size generators, which would basically be used for larger industrial captive power plants, steel turbine or gas turbine driven as well as for small independent power producers (IPPs).

Unfortunately, this segment of the market is not growing domestically for us and since we have just recently commissioned this facility, we don't expect to be able to export very much. So this part of the business is going to be a little bit slow for us for the next 12 months. We had anticipated about Rs 100 crore revenue from this segment but we are going to be somewhere around 30-40 percent of that expectation in the next 12 months.

Reema: On the EPC side, we understand that the company is looking to scale down your EPC segment and the two big projects that you were executing is now nearing completion. When will it get completed and will the company not look to bid for any more EPC projects?

A: We will complete these projects in January and February next calendar year but within this fiscal year. We are actively in the market waiting for new projects. The EPC business -- there is business in the market especially if you look at the cement sector, there is a lot of business right now for waste heat recovery plants for the cement sector. India is the world's largest market for cement waste heat recovery. So we are seeing a lot of traction in this segment. Of course it is very competitive where there are a lot of players especially from China also in this segment but nevertheless there is a lot of business too. So we hope to get some business from that and there are a few other orders in the domestic market, they were well placed especially because we have supplied EPC contracts for customers in the past, so we hope to get some preferential treatment from those customers but as of now it is pretty tough, a lot of competition, hopefully we should be able to get some business very soon.

TD Power System stock price

On September 26, 2014, TD Power Systems closed at Rs 330.30, up Rs 4.35, or 1.33 percent. The 52-week high of the share was Rs 375.00 and the 52-week low was Rs 175.40.

The company's trailing 12-month (TTM) EPS was at Rs 6.81 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 48.5. The latest book value of the company is Rs 146.35 per share. At current value, the price-to-book value of the company is 2.26.

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