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BHEL: Execution issues hit hard
Aug 5, 2013

Bharat Heavy Electricals (BHEL) has announced first quarter results for the financial year 2013-2014. The company has reported 23.7% YoY decline in sales. Profit after tax dropped by 49.5% YoY. Here is our analysis of the results.

Performance summary
  • Net sales for the company declined by 23.7% YoY in 1QFY14.
  • Revenues from both power and industry segments declined 20.5% YoY and 34.4% YoY respectively.
  • Operating profits declined by 67.7% YoY during the quarter.
  • Despite a sharp decline in operating profit, BHEL's total material cost as a percentage of sales reduced from 58.3% to 57.2% in 1QFY14. However, other expenses as a percentage of sales increased from 11.8% to 15.1% in 1QFY14. Also, staff cost increased by 5.7% YoY on an absolute basis.
  • EBITDA margin for the company crashed to 6% in 1QFY14 vs 14.2% in 1QFY13.
  • Forex gain in 1QFY14 was Rs 3.2 bn as compared to just 1.5 bn in 1QFY14. Consequently, there has been a sharp increase in other income this quarter.
  • Increase in other income restricted decline in Net profit to 49.5% YoY.
  • The company received orders worth Rs 14.7 bn during the quarter.

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