BHEL FY12 Net Up By 14 Per Cent, Expect Flat Sales In FY13

The state-run Bharat Heavy Electricals Limited (BHEL) has announced its flash results for the year FY12 wherein it has reported net sales of Rs 49,301 crore, up by 14 per cent from its FY11 figure of Rs 43,337 crore. The profit before tax grew by 11 per cent to Rs 10,001 crore from Rs 9,006 crore in a year-ago period. Even though the margins have not been disclosed, we believe that there is a fall in the EBITDA margins. The net profit for the fiscal stood at Rs 6,868 crore compared to Rs 6,011 crore in FY10.

Although the net profit has been in line with topline growth, the order inflow in FY12 has declined by 63 per cent to Rs 22,096 crore on a YOY basis. There is a highly competitive environment for the businesses due to which its order book has shrunk in size. Besides, the fuel worries in the country have increased due to which new capacity additions would go at a slower pace in the future and hence its order inflows may take further beatings.

Some of the capital goods’ companies were lobbying to levy tax on foreign power equipments. However, the government has not accepted this suggestion. B Prasada Rao, CMD of BHEL, has said that the company has orders from 21 countries. On the home turf, some of the major orders are from Power Grid and ONGC.

The company has also announced that its follow-on offer also remains withdrawn. It was earlier expected to offload 5 per cent of its stake in the company which would have earned it additional revenues of about Rs 4,000 crore. The government has also decided to hold its plans to sell a stake in BHEL.

The financial shares of BHEL have surged by 2.8% in last two days to Rs 267.60. For the next fiscal the company is looking at a flat sales target of Rs 50,000 crore. The company’s current order book is Rs 1,35,000 crore which is 2.7x of FY12 revenues. BHEL is also looking at an order inflow of Rs 60,000 crore in the new fiscal which will be about 2.7x to the FY12 order inflow. We would advise investors to stay invested in the scrip as we expect the situation for the power equipment makers to become better in the coming days. One of the sign could be that the govt. is seriously taking steps to increase the coal supply in the country. Beside the recent presidential directive gives signal of governments will to push the reforms in this particular sector.

Table 1 BHEL Flash Results – (Figures In Rs Crore.)