BHEL: Will maintain 30% revenue growth for FY08

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS BHEL top gainer on the Nifty BHEL will pursue M&As for $ 10 bn revenue target BHEL FY07 net profit jumps 42% at Rs 2,385cr BHEL BSE | NSE 28/05/12 Are Mutual Funds betting on BHEL?

Bharat Heavy Electricals Limited  (BHEL) has announced its FY07 (provisional) results. The company posted net profit of Rs 2,400 crore (Rs 24 billion) versus Rs 1,679 crore (Rs 16.79 billion) in the previous year, a growth of 43%

K Ravi Kumar, Director - Power, BHEL , says that the total order book is at Rs 35,000 cr and is executable over two years. They expect margins to stabilise in FY08.

Their operating margins are close to 16% and is likely to be maintained. BHEL has recently won a large order worth Rs 3,500 cr.

Kumar adds that the order book breakup is 70% from power and 30% from Industry. BHEl expects to maintain 30% revenue growth for FY08.

Excerpts from CNBC-TV18's interview with K Ravi Kumar: 

Q: Take us through the kind of growth that your division as well as the industry division has seen?

 

A: The total turnover we have recorded is Rs 18,702 crore last year. The net profit is about Rs 1679 crore and gross profit is Rs 3675 crore.

 

Q: What's your total order book position as it stands now? What period is it executable over?

 

A: In the power sector we have booked Rs 27,722 crore. The total order book we see during the year is Rs 35,633 crore. It is executable over two and a half years.

 

Q: How have margins been for Q4 as well as FY07?

 

A: The margins have increased. The turnover is Rs 18,702 crore; which is rise of about 29%. The profit before tax is going to Rs 3675 crore which is a growth of 43%. The net profit has gone up to Rs 2385 crore, it is again 42% growth over last year.  The earnings per share have gone to 97.4%, growth of 42%.

 

Q: Your operating profit has a percentage of sales, where does it stand for FY07?

 

A: Profit margin is around 15%.

 

Q: Is that the levels your margins for FY08 will stabilise at or do you see some pressure coming in on the raw material side?

 

A: No, it will be stabilising at that because a good growth is there, so overheads will come down and their margins will be maintained.

 

Q: What about the order book position and how do you see it panning out for FY08 in the light of competition that's prevailing with China?

 

A: This year we have booked record order book of about Rs 35,633 crore, of which the power sector is Rs 27,722 crore. It is a huge order and this is the first time we have received such a big order since the inception of the company and we have got also another order from DVC (Damodar Valley Corporation). Power stream is quite good and I feel that the growth should continue in the plan for the next five years.

 

Q: You said your total order book position currently was Rs 27,000 crore. Can you tell us specifically how much is executable over the next 12 months?

 

A: During the year it is Rs 27,722 crore. The order outstanding is about Rs 54,000 crore and this Rs 54,000 crore order will be executed in the next two and a half years.

 

Q: For this particular order book that you are talking about outstanding there were a lot of reports suggesting that for the raw material side you were going into backward integration - any sort of cost pressures that you are facing currently that may impact margins going into the next fiscal?

 

A: No because overheads will come down, so it will take care of the margins. I do not feel the margins will go down in next year though there maybe an increase in turnover and the margins will not be under pressure next year.

 

 

Q: A word on what the street is expecting - particularly on the dialogue that you are carrying on with ONGC for manufacturing oilrigs. Can you update us on the status of that?

 

A: We are already in the business of R&M (Renovation & Modernisation) of oilrigs for ONGC as well as OIL (Oil India). We have already manufactured certain rigs about three years back. Now we are getting some order from ONGC for these rigs.

 

Q: What would be the size of these orders and in how much time can you confirm to us the inflow?

 

A: It should be during this financial year.

 

Q: In which quarter if you could be more specific?

 

A: First half we should expect.

 

Q: Could you tell us specifically by the end of 2008, what would be the revenue mix between industrial and power?

 

A: It should be 70:30, that is 70 on power and 30 on industry.

 

Q: Could you also tell us specifically since you said margins are expected to stabilize, where do you see margins in both these divisions at the end of 2008?

 

A: Margins about 22% is the gross margin actually. Both will be around 20-22 depending on value and other things. It will be around that same for both the sectors.

 

Q: We have a rough guidance of about USD 10 billion that you are expecting to do by about 2012, could you tell us what sort of a growth rate you would see for 2008?

 

A: We should see atleast the same growth rate that we are doing today, it is about 30% we should expect.