India's No. 1 engineering behemoth, Bharat Heavy Electricals Limited (Bhel), continued its journey towards recovery. Against a loss of Rs 1,980 m posted in December quarter last year, Bhel posted a net profit of Rs 802 m in December quarter 2001. The engineering major's gross sales (including excise duties) are up 16% during the quarter.
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On a nine month consolidated basis (April - December, 2001), the company has recorded a 16% YoY growth in topline and a net profit of Rs 1,014 m (as compared to Rs 1,842 m loss last year). Bhel was hit last year by a huge jump in its staff costs. Moreover, the previous year had seen sluggish topline growth (down 12% YoY).
Bhel has raised Rs 5,000 m through issue of bonds to meet its long term funds requirements. As a result, its debt servicing cost (interest expenses) shot up this quarter. Had it not been for the higher interest burden, Bhel would have finished the quarter with an even better performance.
However, despite this recovery Bhel still has a long way to go. In the nine month period of FY00 (April - December 1999), the company had declared Rs 2,459 m as net profit. Compared to this, its profits of Rs 1,014 m in the current year's nine months, pale in comparision. Also, Bhel has had the benefit of negligible taxes in the current year. There is likelihood that going forward the tax liability will not be low.
At Rs 149 the stock trades at a P/E of 27x annualised nine month FY02 earnings. The valuations seem higher as the earnings are low. Inconsistency in performance has always been Bhel's weakness and as such its valuations are likely to remain range bound.
BHEL has announced third quarter results for the financial year 2016-2017. The company has reported an 18% YoY growth in sales, and a Rs 875 million net profit during the period. Here is our analysis of the results.
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