Background:
Formerly known as Diamond Cables Limited, Diamond Power Infrastructure
Ltd. was founded in 1970. The company began its journey, by setting up a
small, ACSR conductor manufacturing facility in Vadodara, Central Gujarat.
Over the years, through focused growth, it has emerged as India’s largest and
only integrated manufacturer of Power Transmission equipment and turnkey
services provider (EPC).
All products from the portfolio of Diamond Power Infrastructure Ltd. are
geared for Quality and high Returns on Investment (ROI).
The annual survey conducted by IEEMA in 2003, ranked Diamond Power
Infrastructure Ltd. as one of the fastest growing and most profitable cable
companies in India.
Investment Rationale :
DPIL is moving up the value chain by focusing on High margin/high
value products. To name a few, in Cables it intends to focus on Aerial
Bunch Cables(ABC), fire resistant cables and Control and
Instrumentation cables, while in transformers, it intends to focus on
132220 KVA power transformers and dry and resin cast transformers.
This will enrich product-mix and improve profitability.
With three critical businesses in its fold, namely Cables &
conductors, Transformers and EPC Projects and proposed
Transmission Towers Project, DPIL is the only fully integrated
player in the power segment, having facilities to manufacture 80%
of the T & D project requirement in-house. This gives the Company
an advantage over other EPC Players, who outsource 60 to 75% of
the project work.
The Company is proposing doubling its present LT cables
manufacturing capacities. DPIL has already commissioned HT Cables
upto 132 KVAs Manufacturing plant and propose to expand its
capacities further during the current year.
It is also putting up plant to manufacture Extra High Voltage Plant 132 KVAs to 400 KVAs
with an installed capacity of 2000 KMs p.a. Post expansion, DPIL would emerge as one of
the top five manufacturers of power cables in India and the only Company manufacturing
Extra High Voltage Cables over 132 KVAs. It further intends to produce high margin high
value added LT cables such as Aerial Bunch Cables and fire resistant, Control and
Instrumentation Cables.
In India traditionally, the industry has been dependent upon Government owned utilities
SEBs. However, DPIL has the rare distinction of having more than 40% sales from the
private companies and the ratio is likely to further improve to around 70% in the next
couple of years, as large order book comes from private clients which include L & T, ABB,
Tata Power, Siemens and Suzlon to name a few. The Company is consortium partner for
L&T and ABB for their turnkey solutions.
Order book of the company as on July, 2009 is Rs 1150 crore. Of which the EPC orders is
Rs 700 crore and manufacturing order is Rs 450 crore. Cable order out of the manufacturing
order book is Rs 380 crore. Execution period of current order book is about 13-16 months.
The company is setting up an transmission line tower plant with an capacity of 48000
tonnes at a cost of Rs 60 crore. And the plant will be commissioned by Dec 2009. Similarly
the capacity of LT Cables plant is expanded to 30000 kms and it is also adding an Extra High
Voltage Cable capacity of 2800 kms for voltage upto 500kv.
Out of the planned capex the company has already spent upto Rs 139 crore in 2008-09 and
the remaining will be spent in FY10. The company has already commenced operation of HT
cable plant.
The LT cable plant will commence operation in Oct. 2009 and the Extra HV cable plant and
Transmission Tower plant will commence operation by Dec 2009.
Last year the average aluminum price is Rs 100/ Kg and now its is Rs 84/Kg this will boost
the company margin.
The EBITDA margin of cable & conductor business is 14%.
The company expects a business of 3500 MVA in 2009-10 compared to 900 mva in 2008-09
for power transformers. The company's power transformer capacity by the way of acquisition
of apex was 10000 MVA through acquisition of Apex Electricals. Currently the distribution
transformer capacity is 2500 MVA and the company will add another 1000 MVA.
For FY 10, the company expects a minimum growth of 20% in sales.
The company has a very good local partner as far as implementation is concerned for the
Assam project. The Assam project has a mix of both urban localities such as Guwahati and
difficult terrain such as North Cachar.
Medium voltage transformers – this segment is witnessing glut in supply and the demand is
slowing down. However the demand is good for transformer of 230 KV ratings and above.
Quarterly Result :
For the quarter ended June 2009, Diamond Power infrastructure (Diamond Cables) has reported
4% drop in revenue to Rs 169.87 crore mainly due to de-growth in conductors, cables & rods
business where the revenue dipped 26% to Rs 94.86 crore. However the segmental revenue in
power infrastructure (turnkey projects) and transformers segment inched up by 79% and 69%
respectively to Rs 67.33 crore and Rs 21.33 crore. PAT for the quarter stood 28% lower at Rs
13.95 crore.
Segment Results
Power Infrastructure - Turnkey projects of service Connections
The revenue from this segment for the quarter increased significantly by 79% to Rs 67.33 crore
and the segmental PBIT also for increased by 77% to Rs 7.96 crore. However the PBIT margin
marginally slipped by 20 bps to 11.8%.
Transformers
The revenue from transformers segment also surged 69% Y-o-Y to Rs 21.33 crore and the PBIT
from the segment increased by 24% Y-o-Y to Rs 3.09 crore with PBIT margin declining by 525
bps to 14.5%.
Conductor, Cables. Rods
The segmental revenue for the quarter dipped 26% Y-o-Y to Rs 94.86 crore, while the PBIT
margin improved by 100 bps to 15%. However the PBIT declined by 20% to Rs 14.25 crore.
Valuation &View:
DPIL is the only fully integrated player in the power segment, having facilities to manufacture
80% of the T & D project requirement in-house. This gives the Company an advantage over
other EPC Players, who outsource 60 to 75% of the project work. We see huge opportunity in
EPC business over next 2-5 years.
We expect company to achieve turnover of Rs 850 in FY10, on this turnover we expect company
to register earning of Rs. 32 per share.
So we advise investors to buy this stock for a target price of Rs.340 keeping a horizon of 9 to 12
months.
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This is really a great post on Diamond Power Infrastructure and Acsr conductors and accessories.
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