Stock in Action – BGR Energy Systems Ltd

Movement of the Day

Analysis

Market Indicators

52-week range: High of ₹119.25 and low of ₹44.25.
All-time high at ₹989.00 and all-time low at ₹19.00, indicating historical price volatility.

Volume and Value

Traded volume of 3,496,500 shares with a total value of ₹3,547.20 Lacs, indicating active market participation.

VWAP and Beta

Volume Weighted Average Price (VWAP) at ₹101.93, providing a benchmark for average price.
Beta at 1.49 suggests a relatively higher volatility compared to the market.

Pivot Levels

Classic Pivot: PP at ₹96.82, with R1 at ₹98.58 and R2 at ₹99.97.
Fibonacci Pivot: PP at ₹96.82, with support and resistance levels for traders to consider.

Probable Rationale Behind the Surge in BGR Energy Systems Limited

BGR Energy Systems Limited (BGR) has witnessed a substantial surge in its stock price, accompanied by positive market sentiment. This report aims to explore the likely reasons behind this surge, considering various credit strengths and recent developments.

I. Credit Strengths

Experienced Management

BGR boasts an experienced and qualified management team with a four-decade track record in the Boiler, Turbine, and Generator (BTG) and Balance Of Plant (BOP) segments. Their expertise has translated into successful project deliveries, strong relationships with stakeholders, and repeat orders.

Operational Track Record

BGR, operational since 1985, has showcased its project execution capabilities, winning repeat orders from state government discoms. The stable unexecuted order book of Rs. 6671 Crs (as of June 30, 2023) and new order accretion of ~ Rs. 800 Crs for FY23 provide short to medium-term revenue visibility.

Reputed Clientele

BGR's clientele includes esteemed entities like Tamilnadu Generation and Distribution Corporation Ltd, Andhra Pradesh Power Generation Corporation Ltd, and Neyveli Uttar Pradesh Power Limited. This reputed client profile reduces counterparty credit risk.

II. Market Performance and Sentiment

Stock Performance 

Despite a recent 31% gain and a sharp 43% annual increase, BGR's stock may still offer potential, as indicated by its price-to-sales (P/S) ratio of 1x, lower than many peers in the Electrical industry.

Positive Market Signals

The P/S ratio, often indicative of growth expectations, coupled with the company's diverse clientele and moderate order book, signals positive sentiment among investors.

III. Revenue Growth and Industry Perspective

Revenue Decline Consideration 

BGR faced a 20% revenue decline last year, leading to a lower P/S ratio. However, the recent surge in stock price suggests that investors may anticipate a turnaround.

Industry Comparison 

While BGR experienced revenue challenges, the broader industry is expected to grow by 28% over the next year. This provides context for BGR's recent medium-term revenue decline.

IV. Future Prospects and Investor Sentiment

Investor Confidence 

Shareholders appear optimistic, accepting the current low P/S ratio as an opportunity. The recent surge, despite revenue challenges, indicates a belief that future revenue may hold positive surprises.

Medium-Term Outlook 

Considering recent revenue trends, shareholders seem to accept the low P/S, projecting stability in the near future. This could signify that the share price might experience gradual movement rather than significant fluctuations.

Conclusion

The surge in BGR Energy Systems' stock can be attributed to its robust credit strengths, including an experienced management team, an established operational track record, and a reputable clientele. Despite recent revenue challenges, the positive market sentiment, reflected in the P/S ratio and investor confidence, suggests optimism regarding BGR's future prospects.