BHEL: Power potential - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


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

BHEL: Power potential

Dec 24, 2003

India's largest engineering company, Bharat Heavy Electricals Limited (BHEL), has again registered a robust increase in the orderbook in the third quarter. Till date, the company has received orders worth more than Rs 45 bn in the period between October-December 2003. This includes the huge Rs 27 bn order that BHEL has received from National Thermal Power Corporation (NTPC) for installing 1,710 MW generation capacity. With this, the order flow for the nine months (April-December) stands at more than Rs 103 bn (1.3x FY03 gross revenues). In this article, let's have a look at the reasons for the strong order inflow and future growth prospects of the company.

(Rs m) 1HFY04 FY04 E
Gross Sales 28,711 84,872
Operating Profits 2,378 11,993
Net Profits 908 6,454
Operating Margins (%) 8.3% 14.1%
Net Profits Margins (%) 3.2% 7.6%

In 1HFY04, the company's topline increased by 20% where as the bottomline saw growth of 54% YoY. Power remained a major contributor to the topline (65% of total revenues). The PBIT margins from power sector remained steady at 21%. But the industrial segment results improved significantly. The topline grew by around 3% but the PBIT margins stood at around 12.4% as compared to 3.2% during 1HFY03. The management has not given any reasons for the significant improvement in the PBIT margins from this segment, but it is likely a result of the heightened industrial activity in the country, as well as BHEL's strategy of focusing on high end work.

BHEL has plans to increase its export contribution to 17% of its total sales from the current 13.5% by FY07. In order to enhance exports, the company is looking to strike an alliance with the Export-Import Bank of India for floating an international financial services company. The JV will take up funding of BHEL's overseas projects, which will enable it to bag large international orders.

The APDRP (accelerated power development reform program) scheme is likely to help companies like BHEL to clean up and strengthen their balance sheet. APDRP has helped power companies like NTPC to get their dues back from SEBs. This will definitely accelerate the generation capacity expansion plans of the power companies, and consequently, will help engineering companies like BHEL to procure more orders.

At the current price levels of Rs 480, the stock trades at 18x expected FY04 earnings. The valuation looks stretched at the current juncture. However, the long-term growth prospects of the company are good, based on the expected addition in power generation capacity by both private and state owned power companies. To put things in perspective, India needs to add 10,000 MW of thermal power generation capacity every year for the next 10 years. NTPC alone has plans to add 20,000 MW over the next decade. Looking at the increasing order inflow, one gets confidence in view of BHEL's track record of installing 65% of the India's thermal power generation capacity.

Equitymaster requests your view! Post a comment on "BHEL: Power potential". Click here!


More Views on News

BHEL 2019-20 Annual Report Analysis (Annual Result Update)

Oct 21, 2020 | Updated on Oct 21, 2020

Here's an analysis of the annual report of BHEL for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of BHEL. Also includes updates on the valuation of BHEL.

Mazagon Dock Shipbuilders IPO: Should You Apply? (IPO)

Sep 29, 2020

Should you bet on this public sector defence shipbuilder?

BHEL Announces Quarterly Results (3QFY20); Net Profit Down 17.3% (Quarterly Result Update)

Feb 13, 2020 | Updated on Feb 13, 2020

For the quarter ended December 2019, BHEL has posted a net profit of Rs 2 bn (down 17.3% YoY). Sales on the other hand came in at Rs 57 bn (down 22.6% YoY). Read on for a complete analysis of BHEL's quarterly results.

BHEL Announces Quarterly Results (1QFY20); Net Profit Down 239.0% (Quarterly Result Update)

Aug 13, 2019 | Updated on Aug 13, 2019

For the quarter ended June 2019, BHEL has posted a net profit of Rs 2 bn (down 239.0% YoY). Sales on the other hand came in at Rs 45 bn (down 23.7% YoY). Read on for a complete analysis of BHEL's quarterly results.

More Views on News

Most Popular

A Critical Update on the Market (Fast Profits Daily)

Mar 30, 2021

In this video, I'll tell you why I am recommending caution in the market at this time.

My Recent Recommendation Will Profit from the Global Supply Chain Crisis (Profit Hunter)

Mar 31, 2021

A tiny chemical company, started in the Licence Raj era, is a great example of a new wealth creating opportunity.

My Stock Trading Strategy (Fast Profits Daily)

Mar 31, 2021

In this video I'll show you exactly how I go about picking stocks for trading.

What You Need to Find Hundred Baggers (Profit Hunter)

Mar 30, 2021

100 baggers of the last decade share this common trait. Here's how to use it to nail future multibaggers.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Apr 9, 2021 (Close)