POWER MECH PROJECTS

Riding India’s power infra boom

Hyderabad-headquartered leading infrastructure-engineering-construction company Power Mech Projects is engaged in industrial construction, infrastructure construction, overseas business, engineering, material handling, manufacturing and fabrication, and mine development and operation. Its industrial construction business unit covers projects in power and gas, and other industrial and non-power sectors. It provides services for ETC of oilfield boilers, and heat recovery steam generator (HRSG) systems. The company undertakes power projects ranging from 135 MW to 800 MW.

During the last 12 years, its sales turnover has expanded more than four times – from Rs 936 crore in fiscal 2013 to Rs 4,207 crore in fiscal 2024, with operating profit also rising over four times from Rs 122 crore to Rs 493 crore and the profit at net level shooting up almost five times from Rs 51 crore to Rs 249 crore. What is more, prospects for the company going ahead are all the more promising. Consider:

• Having undertaken projects of all types and sizes, and under extreme environments in India and abroad, during its existence of decades, Power Mech has emerged as a towering player in the power sector and has earned a name for executing ultra mega power projects, super-critical thermal power projects, gas turbine generators, hydro-electric generators, operation and maintenance of running plants, and the entire civil work for power plants. In India, the company has spread its footprint overseas and has already established its presence in over 10 countries.
• With such a reputation, the company is flooded with orders. For the last year it had set a target of orders worth Rs 10,000 crore and could secure orders worth Rs 8,759 crore. With this, the order backlog as on March 31, 2024 stands at Rs 57,053 crore. Excluding 2 MDOs, the unexecuted order book stands at Rs 17,362 crore, up 26%. This growth is mainly driven by the civil side, O&M and Electrical. The backlog on the civil side increased from Rs 6,136 crore to Rs 7,814 crore, up 27%. But what is very interesting is that the O&M side has taken a quantum jump — from a backlog of Rs 600 crore last year, it has gone up to Rs 2,197 crore, up 266%. Electrical also has come to life in a big way, mainly in the many jobs taken on railway electrification. The backlog has gone up from Rs 118 crore to Rs 930 crore, which is immensely positive.
• For FY25, Power Mech is well set to demonstrate execution and conversion in the range of 38-40% of the opening order book. In addition to that, revenue from the MDO business is also ramping up. There is a little bit of a slowdown in some areas due to the recent prolonged election schedule, and as such the management has kept a conservative revenue growth target of 30% for FY25. On the margins front too, the direction is on the upside and the management hopes to further improve it in FY25. The management is confident that the company will be close to achieving peak margin levels in FY25.
• On the order book side, the management has set a target of Rs 12,000 crore for FY 25. Its focus will continue to be in industrial plants, operations and maintenance, railways and water. Going forward, the O&M and MDO business will provide stability in revenues as well as margins in a significant way.
• More importantly the management expects positive results in terms of investments and projects. In fact, it expects at least Rs 60,000-70,000 crore of opportunities this year on a regular basis in various sectors. For instance, the power sector is taking a quantum leap in terms of the gaps to be filled in investments and installation, and is adding another 60,000 megawatts — from 218 kilowatts to 280 gigawatts. In FY2025, we expect the company to register EPS of Rs 231.8, which is likely to rise to Rs 305.6 in FY 2026. In FY2027, it can register EPS of Rs 367.6 The scrip trades at Rs 5,120. P/E on the FY2027 EPS works out to 13.5. In FY2027, its book value is expected to cross Rs 2,000.

PERFORMANCE INDICATORS (Rs. in crore)