X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
BHEL: Early signs of momentum - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

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

BHEL: Early signs of momentum
Nov 17, 2014

BHEL has announced second quarter results for the financial year 2014-2015. The company has reported 32% YoY decline in sales. Profit after tax dropped by 73% YoY. Here is our analysis of the results.

Performance summary
  • Net sales for the company declined by 32% YoY in 2QFY15.
  • Operating profits declined by 29% YoY during the quarter.
  • EBITDA margin for the company increased marginally to 4.7% in 2QFY15 vs. 4.6% in 2QFY14.
  • Net profit for the quarter dropped 73% YoY.
  • The company ended the quarter with an order book of Rs 1,037 bn.

Financial performance: A snapshot
(Rs m) 2QFY14 2QFY15 Change 1HFY14 1HFY14 Change
Sales 88,190 60,276 -31.7% 151,716 110,952 -26.9%
Other operating income  1,654 1,164 -29.6% 2,709 2,038 -24.8%
Expenditure 85,724 58,525 -31.7% 146,420 107,895 -26.3%
Operating profit (EBDITA) 4,119 2,916 -29.2% 8,005 5,095 -36.4%
Operating profit margin (%) 4.6% 4.7%   5.2% 4.5%  
Other income 4,979 1,961 -60.6% 10,364 5,439 -47.5%
Interest 247 126 -48.8%  524  599 14.3%
Depreciation 2,387 2,662 11.5% 4,695 5,388 14.8%
Profit before tax 6,465 2,088 -67.7% 13,150 4,547 -65.4%
Tax 1,905 840 -55.9% 3,936 1,364 -65.3%
Profit after tax/(loss) 4,560 1,248 -72.6% 9,214 3,183 -65.4%
Net profit margin (%) 5.1% 2.0%   6.0% 2.8%  
No. of shares         2,448  
Basic & Diluted earnings per share (Rs)*         11.7  
P/E ratio (x)*         21.1  
* On a trailing 12-months basis

What has driven performance in 2QFY15?
  • Revenues of the power segment saw a significant decline of 38% YoY. Considering that they contribute a large 75% of total sales, this is the segment that dragged the overall performance down during the quarter. The industry segment's sales fell by a slower 9% YoY.

  • The company saw a significant fall in raw material costs during the quarter, from 60.5% of sales in 2QFY14 to 57% of sales in 2QFY15. However, this was offset by a big increase in staff costs as a percentage of sales. The overall net effect was a marginal improvement of 0.1% in the company's operating margins during the period.

  • The fall in operating margins along with a spike in depreciation charges and a higher effective tax rate is what led to the bottom line falling by 73% YoY during the quarter.

  • Order inflows for the company were Rs 141 bn versus Rs 45 bn in the previous year's quarter.

    Segment-wise performance
    (Rs m) 2QFY14 2QFY15 Change 1HFY14 1HFY14 Change
    Power
    Revenue 75,764 47,370 -37.5% 129,550 88,811 -31.4%
    % share  81% 75%   81% 77%  
    PBIT margin 14.5% 14.1%   14.3% 13.4%  
    Industry
    Revenue 17,392 15,824 -9.0% 30,318 27,154 -10.4%
    % share  19% 25%   19% 23%  
    PBIT margin -0.2% 1.9%   4.2% 2.5%  
    Gross Total*
    Revenue 93,156 63,193 -32.2% 159,868 115,965 -27.5%
    PBIT margin 11.7% 11.0%   12.4% 10.9%  
    * Excluding inter-segment adjustments & Excise Duty
What to expect?
The management is of the opinion that the economy seems to be getting back on track. In fact, it has indicated that it has already witnessed some momentum in the industrial activity over the last few months. 84 new power projects with investments worth Rs 1.1 trillion were announced. On the ground too many tenders are getting in shape and the private sector is also now showing signs of interest.

Nonetheless, the company being in the late cycle business of capital goods, a lot of this will start showing in the performance of the company only after a few quarters.

For the power equipment market as a whole, about 5,000 MW worth of orders have got finalized during the first half of FY15, and the management expects an overall 15,000 MW of orders to get finalized during the whole year i.e. FY15.

At the current price of Rs 246, the stock is trading at a P/E multiple of 10.2 times our estimated FY17 earnings. Considering these valuation, we believe the negatives are priced in to an extent and maintain our Buy view on the stock.

However, we would like to gently remind you that your allocation to equities should be decided upon after keeping aside some safe cash. Also within your overall exposure to equities please ensure that you broadly follow our suggested asset allocation and that no single stock comprises more than 5% of your portfolio.

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group.
BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.
DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.
GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.
DETAILS OF ASSOCIATES:
  1. Quantum Information Services Private Limited (QIS) having its registered office at 103, Regent Chambers, Nariman Point, Mumbai 400021 is registered under SEBI (Investment Advisers) Regulations, 2013 vide Registration No. INA000000680. QIS provides information on mutual funds and personal financial planning, financial markets in general, and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services through its website www.personalfn.com
  2. Agora Holdings (Cyprus) Limited having its registered office at Akropolis, 59-61, 3rd Floor, Office 301 Strovolos 2012 Nicosia Cyprus belongs to Agro group (Agora) which owns www.agora-inc.com and is one of the largest and most successful consumer newsletter publishers in the world.
  3. Common Sense Living Private Limited (CSL) owns www.commonsenseliving.co.in and is an initiative that provides straightforward lifestyle and wealth-building ideas from wealth coach Mark Ford. CSL is 100% subsidiary Company of Equitymaster.
DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. Equitymaster has financial interest in the subject company.
  2. Equitymaster's Associates, Research Analyst or his/her relative have no financial interest in the subject company.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  4. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

BHEL SHARE PRICE


Dec 13, 2017 (Close)

TRACK BHEL

BHEL - DONGFANG ELEC. COMPARISON

COMPARE BHEL WITH

MARKET STATS