Way2Wealth neutral on Bharat Heavy Electricals

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Way2Wealth neutral on Bharat Heavy Electricals

Way2Wealth has maintained neutral rating on Bharat Heavy Electricals (BHEL), in its January 31, 2012 research report.

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Way2Wealth has maintained neutral rating on Bharat Heavy Electricals (BHEL), in its January 31, 2012 research report.

"BHEL, order inflows for 9MFY12 were at Rs.153bn, as against Rs.358bn for 9MFY11. As per the management, orders worth Rs.58.5bn were cancelled in Q3FY12, including 2X600MW coal-based power project of a private developer & 1X300MW. Order backlog stood @ Rs.1465bn down by 7% yoy & 9% qoq. Of the total order book power segment stood power segment stood at Rs.1174bn, industry at Rs.197bn & the international orders at Rs.94bn. Company has received LoIs for two projects (worth INR14bn) in January 2012 - 300MW from Abhijit Group worth INR6.3bn and six oil rigs from ONGC worth INR7.7bn."

"BHEL's 3QFY12 revenues of Rs.105bn (+19% YoY) were in line with our estimates of Rs.108bn. The Power equipment segment, which accounts for a chunk of revenues (~79%), registered a growth of 58%, while the industrial equipment business (~21%),degrew by 37%. Inflation in input costs and other operating costs rose by 28% and 65% respectively. Other expenditure rose on account of higher transportation costs, which rose by Rs.1.4bn yoy due to the despatch of higher rating sets. Additionally, higher provisioning for liquated damages and contractual obligations by ~Rs.1.6bn also took a toll on operational profitability. Consequently, EBIDTA was flat @Rs.20.8bn yoy. A higher component of other income and lower tax provisioning resulted in BHEL recording a PAT growth of 2% yoy @Rs.14.3bn. With clouds surrounding the Power sector & no clear visibility of orders, at its CMP of Rs.245 we give a 'NEUTRAL' rating for BHEL," says Way2Wealth research report.

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