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Tuesday, September 9, 2008

Stocks benefitting from NSG Waiver

L&T
L&T manufactures reactor vessels for PHWR and FBR—designed technology, and critical equipment and systems for heavy water plants, fuel re-processing plants and plasma reactors. It also manufactures other critical components such as Steam Generator Assemblies, reactor roof slabs, and other control and switchgear equipment for a nuclear plant. L&T has also been accredited by ASME to use "N" and "NPT" stamps for some of its products including the MC vessels, piping system and storage tanks. This is also likely to boost its ability to export nuclear components in the future.

BHEL
BHEL is the leading manufacturer of boilers, turbines and generators in the country. The nuclear opportunity will augur well for the company as BHEL has already joined hands with NPCIL to jointly execute engineering-procurementconstruction projects for nuclear power plants. The joint venture would also explore and evaluate the various technology options available for Steam Turbine Generator sets of 700MWe rating and above. It would also help in developing BHEL as an indigenous designer and manufacturer of Steam Turbine Generator sets of these ratings to meet the needs of the various nuclear projects proposed to be set up in the country in future.

NTPC
In its recent analyst meet, National Thermal Power Corporation (NTPC) had shown its interest in generating power using nuclear technology. Being one of the largest utility companies in the country, NTPC has the skills and a strong balance sheet to support its initiative.

HCC
That Hindustan Construction Company (HCC) has been associated with the construction of four out of every seven (executed/under execution) nuclear plants coming up in India is the proof of the confidence reposed in the company by Nuclear Power Corporation. HCC was also the first Indian construction company to undertake civil engineering works for PHWR type nuclear power projects in the country.

Many more likely to benefit
Besides the ones mentioned above, there would be a host of other companies that would also benefit from the opening of India's nuclear power sector. Companies operating in the balance-of-plants space (ie makers of pumps, pipes etc) would also benefit, for instance. Companies like Crompton Greaves, Ratnamani Metals, KSB Pumps, Gammon India, Rolta India and Walchandnagar Industries (to name a few) are some likely beneficiaries of the NSG waiver. In the recent past, companies like Punj Lloyd, GMR Infrastructure and Reliance Infrastructure had also shown interest in entering the nuclear power space and hence could gain from the development.

Financial impact of NSG waiver
The resumption of nuclear commerce definitely spells good news for the utility, power and infrastructure sectors. However, we do not see any impact of the NSG waiver on our FY2009 and FY2010 estimates for the possible beneficiaries under our coverage because there will not be any revenue flow as a result of this development during this period.

Must Read: Beneficiary stocks/companies of NSG Waiver

Beneficiaries of the deal—a snapshot
Products and services Companies who provide them
Project handling L&T, BHEL
(EPC contractor)
Civil construction works L&T, HCC, Gammon, Punj Lloyd, Reliance Infrastruture, BGR Energy
Nuclear reactor Areva, Alstom L&T
Boiler BHEL
Boiler feed pumps KSB, Kirloskar Brothers, Mather & Platt, Jyoti Ltd, Bharat Pumps and Compressors
Steam turbine BHEL
Valves BHEL, L&T, KSB Pumps
Cooling water condenser BHEL, L&T
Heat exchanger Alpha Laval, GEI Hammon
Pipes Maharashtra Seamless, Ratnamani Metals and Tubes
Control panels Honeywell Automation
Consulting and engineering service Rolta India

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