BHEL (Q3 FY14)

India Infoline News Service | Mumbai |

BHEL registered de-growth of 15.5% yoy in topline to Rs86.3bn due to lack of demand from the captive power plants and slower execution at the major power producers.

CMP Rs160, Target Rs123, Downside 23.1%
  • Q3 FY14 numbers were marginally above our estimate on the back of lower other expenditure

  • Topline of Rs86.3bn was lower by 15.5% yoy and marginally lower than our expectation of Rs87.2bn

  • Order inflows for the quarter stood at Rs72bn, higher by 269% yoy on a weak base. Order book was lower by 11.5% yoy and 1.7% qoq to 1,006bn

  • Operating margins shrunk by 457bps yoy to 11.4%, but higher than our estimate of 9.7% 

  • The company has declared an interim dividend of Rs1.31 per share

  • 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 revised price target to Rs123.

Result table
(Rs m)
Q3 FY14
Q3 FY13
% yoy
Q2 FY14
% qoq
Net sales
86,349
102,197
(15.5)
89,844
(3.9)
Material costs
(48,801)
(57,364)
(14.9)
(53,319)
(8.5)
Personnel costs
(15,256)
(14,373)
6.1
(16,129)
(5.4)
Other overheads
(12,432)
(14,119)
(11.9)
(16,277)
(23.6)
Operating profit
9,859
16,341
(39.7)
4,119
139.3
OPM (%)
11.4
16.0
(457) bps
4.6
683 bps
Depreciation
(2,416)
(2,198)
9.9
(2,387)
1.2
Interest
(323)
(509)
(36.6)
(247)
30.9
Other income
2,908
3,324
(12.5)
4,979
(41.6)
PBT
10,028
16,957
(40.9)
6,465
55.1
Tax
(3,080)
(5,139)
(40.1)
(1,905)
61.7
Effective tax rate (%)
30.7
30.3

29.5

PAT
6,948
11,819
(41.2)
4,560
52.4
PAT margin (%)
8.0
11.6
(352) bps
5.1
297 bps
Ann. EPS (Rs)
2.3
19.3
  (88.2)
1.5
  52.4
Source: Company, India Infoline Research

Top-line degrowth continues

BHEL registered de-growth of 15.5% yoy in topline to Rs86.3bn due to 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 28.5% 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 FY15. 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. Availability of coal remains a critical issue as existing capacities are running quite below their rated capacities.


Outlook for order inflows remain sluggish

Order book at the end of Q3 FY14 stood at Rs1tn, lower by 1.7% on a qoq basis and 11.5% yoy. Order inflow for the quarter was higher by 238% yoy on a weak base of Q3 FY13 to Rs66bn, largely on the back o

BSE 92.25 0.55 (0.60%)
NSE 92.10 0.55 (0.60%)

***Note: This is a NSE Chart

 

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