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)
Earnings per share
Current P/e ratio
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.
1. Power sector
2. Industry sector
Value added per employee
Megawatt commissioned (MW)
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.
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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