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MOSL: CAPITAL GOODS-PGCIL ordering down 68% YoY in FY18; At lowest levels since FY09

Capital Goods: PGCIL ordering down 68% YoY in FY18; At lowest levels since FY09

 

Power Grid Corporation of India (PGCIL) accounts for 45-50% of annual transmission capex in India. It is one of the largest customers for the Indian transmission equipment suppliers and contractors. In this note, we will analyze the ordering trends by PGCIL in FY18 and their implications for the Indian transmission equipment suppliers.

• Orders placed by PGCIL declined 68% YoY to INR90b in FY18 owing to the absence of large-ticket orders. Notably, orders declined across key categories.
• In FY18, substation ordering fell 91% YoY (note that FY17 included two large orders: (1) INR58b order for Raigarh-Pugalur HVDC line and (2) INR35b order for the Pugalur-Trichur HVDC line), transmission line ordering declined 39% YoY, and transformers ordering plunged 78% YoY.
• We expect PGCIL's ordering activity to stabilize in the INR150-200b range, as majority of the planned capex for inter-state transmission infrastructure development is already incurred. In our view, state transmission companies are likely to drive growth in transmission orders/capex in the 13th plan (2018-22E).

 Power Grid orders decline 68% YoY in FY18

• Orders placed by PGCIL stood at INR90b (-68% YoY) in FY18 - the lowest since FY09 - primarily due to the absence of large-ticket orders. Of the total orders, transmission line orders constituted 39%, followed by substation (17%), railway electrification (9%) and transformers (5%). Note that PGCIL has begun incurring capex for rail electrification projects from FY18, placing orders worth INR8.6b.