BHEL: 'Power'ful performance - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

BHEL: 'Power'ful performance

Apr 6, 2004

On the back of increasing order intake from the power segment, accompanied by improving margins in the industrial segment, engineering major BHEL outperformed the Sensex significantly in the last one year. As can be seen from the graph below, Rs 100 invested in BHEL at the start of April last year would have appreciated to Rs 285 (185% return) currently, as compared to Rs 187 for the BSE-Sensex (87% return). Yesterday, the management of BHEL declared the provisional numbers for FY04. Let's have a look at the same.

As per provisional figures declared by the management, BHEL has witnessed a 15% growth in topline and a significant 38% increase in bottomline for the year ended March 2004. Due to the company's continuous efforts to rationalize work force, which now stands at 44,500 as compared to 45,500 in FY03, the value added per employee has increased from Rs 0.69 m to Rs 0.83 m (up 20%).

Provisional figures (Rs m) 4QFY03 4QFY04 Change FY03 FY04 Change
Gross turnover 31,484 41,973 33.3% 74,820 86,100 15.1%
PBT 6,296 6,571 4.4% 8,020 9,470 18.1%
PAT 3,761 4,763 26.6% 4,450 6,150 38.2%
Order Inflow (Rs bn) 29.5 39.7 34.5% 112.3 164.7 46.7%
EPS 61.5 77.8   18.2 25.1  
P/E         26.5  

On the back of huge order inflows worth Rs 165 bn this fiscal, up 46% YoY (last year Rs 112 bn), the outstanding orderbook size stands at Rs 237 bn, which is 2.8 times FY04 provisional gross sales. Break up of orderbook shows that power segment received orders worth Rs 127 bn, which is 79% higher YoY. On the other hand, the company's industrial segment witnessed a 23% YoY increase in the order inflow. The company's export division has received orders worth Rs 2.3 bn during the fiscal.

At PBIT level, the company's power division performance remained in line with the past trends (around 19% margins). But the industrial segment saw a significant improvement in PBIT margins (12% this year as compared to 8% in FY03). The management has not clarified the reasons for the higher margins as yet. But in our view, the probable reasons for this are declining manpower and BHEL's entry into higher margin businesses like water treatment projects. Just to put things in perspective, BHEL has pruned its employee numbers by over 27% in the last 5 years to 44,500 in FY04.

At the current price level of Rs 667, the stock trades at P/E multiple of 26.5x FY04 earnings. The market cap to sales ratio for the stock stands at 1.5x projected FY06 revenues, which are on the higher side of valuation band. Both private and state owned power companies in India are expected to add huge generation capacities, which will further provide strength of BHEL's orderbook size going forward. BHEL's track record of installing 65% of the India's thermal power generation capacity also speaks for its expertise in installing power plants. But as we have been saying earlier, there is price for every business. It seems that the stock price has factored in the future growth. Going by the valuation discipline, the stock looks fully valued at current juncture.

Equitymaster requests your view! Post a comment on "BHEL: 'Power'ful performance". Click here!

  

More Views on News

BHEL 2020-21 Annual Report Analysis (Annual Result Update)

Oct 19, 2021 | Updated on Oct 19, 2021

Here's an analysis of the annual report of BHEL for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of BHEL. Also includes updates on the valuation of BHEL.

BHEL Shares Tumble 18% on Disappointing March Quarter Results (Views On News)

Jun 14, 2021

BHEL's net loss narrowed to Rs 10.4 bn in the March 2021 quarter.

Infrastructure Boom Ahead. Here are 3 Ways to Play It... (Views On News)

Aug 24, 2021

India is expected to become the third largest construction market next year. For that, it needs huge investments.

G R Infraprojects Makes a Bumper Listing on Bourses. Big Gains for IPO Investors (Views On News)

Jul 19, 2021

GR Infra shares were subscribed over 100 times in its IPO.

Here's Why the Stock of Ashoka Buildcon was in Focus Today (Views On News)

Jul 13, 2021

Ashoka Buildcon shares up on bagging NHAI project.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

BHEL SHARE PRICE


Nov 30, 2021 (Close)

TRACK BHEL

BHEL - RAJOO ENGIN. COMPARISON

COMPARE BHEL WITH

MARKET STATS