Engineering: Looking at strong FY04 - 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?  

Engineering: Looking at strong FY04

Apr 7, 2003

While most sectors finished FY03 on a glum note, Engineering companies had a whale of a time. Almost all engineering companies finished FY03 with gains in performance and consequently, in stock price.

(Share price Rs)28-Mar-0231-Mar-03% Change
BSE Sensex3,4693,049-12.1%
S&P CNX Nifty1,130976-13.6%
Atlas Copco114277142.3%
Thermax Ltd.7813876.9%
Tata Honeywell14723862.8%
Bharat Electronics12718142.3%
Ingersoll Rand14319536.8%
Bhel16922432.4%
ABB26629410.9%
Crompton Greaves465110.9%
Siemens25528110.0%
L&T1811852.1%
        
Losers
Esab India2941-29.4%
Cummins India5253-1.5%

The table above reflects the overall positive sentiment towards engineering companies in FY03. This came about through a mix of higher orderflows, government's thrust towards power reforms and productivity gains. A look at the order inflow of the top engineering companies puts forth the the reason for the strength in market capitalisation. Both ABB and Bhel reported record order inflow growth (see table below).

Order flow…
Rs bnOrder inflow
in FY03
Order
backlog
backlog as a
% FY03 turnover
ABB13.18.873.2%
Bhel112.5158.0140.5%
Thermax*-1.934.5%
* nine month period ended December'02

Consequently, most companies finished FY03 with encouraging topline and bottomline performances. We have illustrated the performance of Bhel, ABB and Thermax to highlight this point. All the aforesaid companies have put themselves neck deep in restructuring when the times were not so good. While Bhel reduced its employee base by nearly 23% to 48,000 in the last 4 years, Thermax too, has rationalised its employees by over 16% in recent times. Though we did not include Siemens in this sample, it is worthwhile to note that even this company rationalised its employee size by 7% in the last one year. These measures too gave a further fillip to the companies bottomline.

ABB
(Rs m)FY02FY03% change
Revenues10,55812,00613.7%
Order inflow10,92013,05019.5%
PAT65397248.9%
Net profit margin (%)6.2%8.1% 
Bhel
(Rs m)FY02FY03% change
Revenues72,87075,1003.1%
Order inflow98,550112,48014.1%
PAT4,6805,1109.2%
Net profit margin (%)6.4%6.8% 

Apart from employee rationalisation, these companies have also been taking a hard look at their product folio’s and aligned them to fit consumer needs. While ABB signed up with the parent as a potential global sourcing base for equipment manufacturing, BHEL started to outsource small manufacturing needs to spend more time on research and development of high end products. Thermax restructured its entire management team filling its board with independent directors thus improving management credibility.

Thermax
(Rs m)9mFY029mFY03% change
Revenues2,8053,59428.1%
Order backlog2,5101,900-24.3%
PAT63144129.1%
Net profit margin (%)2.2%4.0% 

With the government continuing its focus on power sector reforms, the sector has much to look forward to in the coming years. The focus on building and enhancing our network of roads, ports, airports and railways will also be a boost for the engineering companies in the coming years. The companies burgeoning order backlog indicates a strong FY04 awaiting the sector.

Equitymaster requests your view! Post a comment on "Engineering: Looking at strong FY04". Click here!

  

More Views on News

TEXMACO INFRA 2020-21 Annual Report Analysis (Annual Result Update)

Nov 15, 2021 | Updated on Nov 15, 2021

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

SHANTHI GEARS 2020-21 Annual Report Analysis (Annual Result Update)

Nov 15, 2021 | Updated on Nov 15, 2021

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

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.

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 IPO to Hit the Market on 7 July. All You Need to Know (Views On News)

Jul 1, 2021

G R Infraprojects' IPO will be an offer for sale of up to 11.5 m shares. There will not be any fresh issue of shares.

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.

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'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

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

S&P BSE CAPITAL GOODS


Dec 8, 2021 01:13 PM

S&P BSE CAPITAL GOODS 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS