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Bhel: June quarter in red, again...

Jul 31, 2002

Engineering behemoth, Bharat Heavy Electricals Limited (Bhel) has posted a net loss of Rs 489 m in its first quarter ended June 30, 2002. The performance is much better than the Rs 1,252 m loss it reported in 1QFY02. However, the results again bring to fore the volatile nature of Bhel's earnings. The company had finished FY02 with over 14% topline and 44% bottomline growth.

(Rs m) 1QFY02 1QFY03 Change
Net Sales 8,881 8,770 -1.3%
Other Income 332 235 -29.1%
Expenditure 9,846 9,001 -8.6%
Operating Profit (EBDIT) -966 -232 -
Operating Profit Margin (%) -10.9% -2.6%  
Interest 200 118 -41.0%
Depreciation 418 434 3.8%
Profit before Tax -1,252 -548 -
Tax 0 -59 -
Profit after Tax/(Loss) -1,252 -489 -
Net profit margin (%) -14.1% -5.6%  
No. of Shares (eoy) (m) 244.8 244.8  
Diluted Earnings per share* -20.5 -8.0  

Historically, Bhel's performance has been volatile quarter to quarter due to the inherent nature of its business. Bhel had a great FY02 and at the end of it the company's orderbook stood at Rs 120 bn. So in all likelihood, Bhel will bounce back again in the coming quarters.

Cost break-up
(Rs m) 1QFY02 1QFY03 Change
Raw material 4,408 3,571 -19.0%
Staff 3,374 3,390 0.5%
Others 1,707 1,658 -2.9%
Deffered revenue expenditure 357 383 7.2%
Total expenditure 9,846 9,001 -8.6%

The power industry contributed 61% to Bhel's topline in 1QFY03. The EBIT from the sector was a healthy 21%. However, the EBIT from other industries was negative reflecting the difficult economic environment.

Revenue break-up
(Rs m) 1QFY03
Power 6,160
% of sales 61.3%
Industry 3,893
% of sales 38.7%
Total gross revenues 10,053
EBIT break-up
(Rs m) 1QFY03
Power 1,282
EBIT as % of power sales 20.8%
Industry -47
EBIT as % of industry sales -1.2%

The stock trades at Rs 173, a P/E of 7.4x our FY03 expected earnings. While earnings volatility is a concern, we expect Bhel to recover in the coming quarters.

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