BSES: EPC volatility hits 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?  

BSES: EPC volatility hits performance

Oct 28, 2002

BSES, one of India's leading private utilities, has declared a 4% growth in sale of electricity in 2QFY03 (1588 MUs). In value terms, revenues from sales of electricity has gone up by over 10% YoY during the quarter. The company's income from engineering contracts and computer division have taken a hit this quarter (down 42%). This has resulted in a marginal 1% growth in the company's operating income.

(Rs m)2QFY022QFY03Change1HFY021HFY02Change
Sale of electrical energy5,8546,47010.5%11,68912,6668.4%
Income from EPC, contracts & computer division1,301751-42.3%2,0481,502-26.6%
Total operating income7,1547,2200.9%13,73814,1683.1%
Other Income2042239.3%337324-3.8%
Expenditure5,9206,1784.4%11,00611,5765.2%
Operating Profit (EBDIT)1,2341,043-15.5%2,7322,592-5.1%
Operating Profit Margin (%)17.3%14.4%19.9%18.3%
Interest 13616924.1%3003299.7%
Depreciation52769732.2%1,0351,28223.9%
Profit before Tax775400-48.4%1,7341,305-24.7%
Tax4420-54.2%11478-31.1%
Profit after Tax/(Loss)732380-48.1%1,6201,227-24.3%
Net profit margin (%)12.5%5.9%13.9%9.7%
No. of Shares (eoy) (m)137.8137.8137.8137.8
Diluted Earnings per share*21.211.023.517.8
*(annualised)
Current P/e ratio18.611.5

While operating income growth slowed down, BSES was not able to prune its operating expenses in tandem. Consequently, the company saw a 16% dip in operating profit, with operating margins shrinking to 14.4% (17.3% last year). A significant 79% jump in other expenses seems largely responsible for the escalation in operating costs. Higher interest outgo as well as depreciation provisioning weakend profitability. Consequently, BSES reported a 48% dip in net profit in September quarter 2002.

Cost Breakup...
(Rs m)2QFY012QFY02Change1HFY011HFY02Change
Cost of energy purchased3,0723,3769.9%5,5716,22111.7%
Cost of fuel9409410.2%2,0722,057-0.7%
Cost of material & other direct
expenses (EPC and contracts)
1,045611-41.6%1,7031,239-27.3%
Tax on electricity12888-31.4%246203-17.3%
Staff cost26031019.2%50157915.5%
Other expenses47685279.0%9141,27839.9%
Total expenditure5,9206,1784.4%11,00611,5765.2%

BSES's problems continue to grow. On the one hand, the company's growth in the Mumbai circle is pegged at only 4%-5% per annum, its EPC and contracts business is too volatile for comfort. Right now, it is only earning from the Mumbai circle and its distribution ventures in Orrisa and Delhi are currently in the red. Its generation business in Kerala too is in losses. Due to non-payment of outstanding dues by Kerala State Electricity Board (KSEB), the Kerala plant has been shut down since October 2001. Also, the MERC order over stand by charges continues to hang in fire.

Though in the long term, BSES's investments in Kerala, Orrisa and Delhi are likely to bear fruit, in the short term the paucity of returns from these investments in hitting the company's operating performance. At Rs 205 the stock currently trades at 11.5x 1HFY03 annualised earnings. The valuations are on the higher side due to the poor September quarter numbers. The results are likely to dampen valuations over the medium term.

Equitymaster requests your view! Post a comment on "BSES: EPC volatility hits performance". Click here!

  

More Views on News

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

Nov 3, 2021 | Updated on Nov 3, 2021

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

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.

Will the Revival Plan of JSW Energy's Renewable Business Boost its Presence in India? (Views On News)

Nov 26, 2021

How will this move help the company in building and streamlining its renewables portfolio.

There's a New Kid on the Green Hydrogen Block (Views On News)

Nov 17, 2021

Billionaire Gautam Adani has announced plans to invest up to US$70 bn in renewable energy and produce the cheapest hydrogen in the world.

Solar's Hot in India. It's About to Get Hotter... (Views On News)

Nov 1, 2021

Will this company help India to become the largest player in solar space?

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

RELIANCE INFRA SHARE PRICE


Dec 9, 2021 (Close)

TRACK RELIANCE INFRA

  • Track your investment in RELIANCE INFRA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON RELIANCE INFRA

RELIANCE INFRA 5-YR ANALYSIS

COMPARE RELIANCE INFRA WITH

MARKET STATS