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Bhel: Getting back the rhythm - Views on News from Equitymaster
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  • Apr 4, 2001

    Bhel: Getting back the rhythm

    The country's largest engineering company, Bharat Heavy Electricals Limited (Bhel), declared a 51% decline in its provisional net profits in FY01. The results did not come as a surprise as the year has not been a good one for the engineering behemoth.

    Provisional figures (Rs m) FY00 FY01 Change
    Gross turnover 67,700 67,390 -0.5%
    Net profit 5,994 2,960 -50.6%
    Earnings per share 24.5 12.1  
    Current P/e ratio   10.3  

    In the first nine months of FY01, Bhel had incurred a net loss of Rs 1.8 bn. This means that the company earned a net profit of 4.8 bn in the fourth quarter of FY01. Going by this count, Bhel's performance gives hope for the future.

    (Rs m) FY00 FY01 Change
    Orders inflow 72,210 55,480 -23.2%
    1. Power sector 40,150 27,280 -32.1%
    2. Industry sector 25,030 21,050 -15.9%
    3. Export 7,030 7,150 1.7%
    Value added per employee 0.498 0.526 5.6%
    Megawatt commissioned (MW) 3,582 2,914 -18.6%

    The company's gross turnover was marginally down YoY. The order inflow has declined by 23%, which was led by a decline in orders from the power sector (down 32%). As a result it commissioned only 2,914 MW of power capacity during the year (down 19% YoY).

    Despite this, a record 73% of the total power generated in the country was contributed by Bhel sets (power plants). Bhel is expected to do well in the next few quarters owing to the orders it has. The next few months are likely to add to the orders already at hand as two large power projects to be developed by National Thermal Power Corporation (NTPC) amounting to approx. Rs 35 bn, are expected to be awarded soon. Historically, Bhel has had a close working relationship with NTPC. Infact, Bhel has been awarded almost 85% of power equipment contracts floated by NTPC.

    At Rs 125 the stock trades at a P/e multiple of 10.3 times its FY01 earnings. Bhel's results were lower than our estimates. This was because the company provided for higher payment for wage arrears. We will have to rework our numbers based on this. However, given the improved scenario and prospects of improved future earnings, the stock looks set for a re-rating.



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    Aug 18, 2017 01:12 PM



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