Feb 01, 2013, 02.06 PM | Source: CNBC-TV18
In an interview to CNBC-TV18, Sanjeev Zarbade of Kotak Securities reviewed BHEL’s numbers.
Sanjeev Zarbade (more)
Analyst, Kotak Securities | Capital Expertise: Equity - Fundamental
Below is the verbatim transcript of an interview aired on CNBC-TV18.
Q: Your take with regards to Bharat Heavy Electricals ’ numbers. It seems like it has disappointed consensus estimate as well.
A: The numbers are disappointing both on the topline as well as the bottomline and even the EBITDA margins are substantially lower. So, while we were expecting a possible disappointment at least on the execution side but the way the EBITDA margins have come at sub 17 percent, definitely, there is significant disappoint in the company.
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Q: Even the order book looks quite disappointing at this level. Where do you see the stock head from here? It has already got down to that Rs 220 level. How much more of a pressure do you expect to see?
A: The stock price is the function of the order intake that the company tends to announce. During this quarter i.e. third quarter as well, there has been very low order intake. In the coming months there are couples of orders in which the company is favourably positioned and that may probably provide some kind of support to the stock price. However, in general, we believe that the trend for the stock price at least in the medium-term is on the downward side.
Q: What would you make with regards to the margins because pricing pressure has started showing in terms of margins at this point in time for BHEL. Give us some specifics in terms of how exactly do you expect the margins to progress considering that the order book is declining quite considerably as well?
A: For BHEL, as of now, they would continue to have a negative impact of having much more fixed cost structure. Since the revenue growth is slowing down, it will continue to have a negative impact on the margins. So, that is one concern that we have.
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