BHEL (Q2 FY14)

India Infoline News Service | Mumbai |

BHEL registered de-growth of 14.9% yoy in topline to Rs89.4bn on the back of lack of demand from the captive power plants and slower execution at the major power producers.

CMP Rs140, Target Rs123, Downside 11.8%
  • Q2 FY14 numbers were quite weak due to one-off items worth ~Rs5bn and high fixed costs

  • Topline of Rs89.8bn was lower by 14.9% yoy, but marginally higher than our expectation of Rs87.9bn

  • Order inflows for the quarter was down by 5% yoy at Rs30bn, order book was lower by 6% qoq to 1,023bn

  • Operating margins shrunk by 13.4ppts yoy due one-offs related to BHPV merger (Rs1.9bn) and provisioning for doubtful debtors worth ~Rs3bn

  • Sluggish order inflow momentum going ahead coupled with pressure on margins would lead to earnings de-growth over the next two years.

  • Maintain SELL with a price target to Rs123

Result table
(Rs m)
Q2 FY14
Q2 FY13
% yoy
Q1 FY14
% qoq
Net sales
89,844
105,615
(14.9)
64,581
39.1
Material costs
(53,319)
(61,326)
(13.1)
(36,341)
46.7
Personnel costs
(16,129)
(14,814)
8.9
(14,750)
9.4
Other overheads
(16,277)
(10,481)
55.3
(9,605)
69.5
Operating profit
4,119
18,994
(78.3)
3,886
6.0
OPM (%)
4.6
18.0
(1340) bps
6.0
(143) bps
Depreciation
(2,387)
(2,163)
10.3
(2,308)
3.4
Interest
(247)
(258)
(4.4)
(278)
(11.2)
Other income
4,979
1,307
280.9
5,385
(7.5)
PBT
6,465
17,880
(63.8)
6,685
(3.3)
Tax
(1,905)
(5,135)
(62.9)
(2,031)
(6.2)
Effective tax rate (%)
29.5
28.7

30.4

PAT
4,560
12,745
(64.2)
4,654
(2.0)
PAT margin (%)
5.1
12.1
(699) bps
7.2
(213) bps
Ann. EPS (Rs)
1.5
20.8
  (92.8)
1.5
  (2.0)
Source: Company, India Infoline Research

BHEL reports top-line degrowth for the fourth consecutive quarter

BHEL registered de-growth of 14.9% yoy in topline to Rs89.4bn on the back of lack of demand from the captive power plants and slower execution at the major power producers. The company has indicated that execution has been slower at the customer’s end due to lack of clearances for its projects and tight liquidity market conditions. The industry segment revenue declined 15.4% yoy due to lower demand from industries like cement and metals. The company highlighted that the demand scenario for captive power plants is bleak on account of lack of fuel availability and sluggish investment cycle. The management expects some revival in H2 FY14. However, no specific revenue guidance was issued by the company unlike it did historically. We expect execution for power projects and industry segment to remain constrained given the issues in terms of clearances and funding, particularly for IPPs and slowdown in investment cycle.

 

Outlook for order inflows remain sluggish

Order book at the end of Q2 FY14 stood at Rs1.02tn, lower by 5.8% on a qoq basis and 16% yoy. Order inflow for the quarter was lower by 5% yoy to Rs30bn, higher than our estimate of Rs25bn. For the second consecutive quarter, there was no new order for BTG. Of the total order book, power segment accounted by 80%, 9% share of industrial segme

BSE 89.90 0.25 (0.28%)
NSE 89.90 0.30 (0.33%)

***Note: This is a NSE Chart

 

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