BHEL Q2 PAT seen up 9% at Rs 1250 cr

State-owned BHEL is expected to report a profit after tax of Rs 1,250 crore in the second quarter of FY12, a growth of 9% as compared to Rs 1,142 crore in the corresponding quarter of last fiscal.

Total income is seen going up 16% to Rs 9,846 crore from Rs 8,491 crore during the same period.
EBITDA is likely to go up 11% to Rs 1,813 crore in the July-September quarter of FY12 versus Rs 1,632 crore in a year ago period.
Operating profit margin is expected to be at 18.41% versus 19.23% year-on-year. What to expect ---
Expect decent topline growth on the back of execution of strong order backlog
Q1FY12 saw some slowdown in execution due to delays in receiving imported components
These were temporary issues which are expected to have been resolved by Q2FY12
Margin pressure expected due to cost pressures
Order inflows are expected to decline YoY in Q2FY12 and H1FY12 and this is a key factor to watch for NTPC bulk tenders in Q2FY12
BHEL got preferential treatment for both boiler and turbine tenders recently awarded by NTPC
As a result, company bagged 4x800MW and 2x800MW of the boiler and turbine tenders as L2
Estimated value of orders bagged is around Rs 6700 crore; these tenders are yet to be finalized Key concerns w.r.t NTPC tenders for BHEL ---
* BHEL will need to match L1 price and therefore might have to compromise on strong margins that it has enjoyed so far     
* Increased competition from newer players was seen during the bidding of the NTPC tenders
** This will be negative for players like BHEL and L&T in the long run Capacity
BHEL currently has around 15GW of manufacturing capacity which it plans to expand to around 20GW by FY12-end
 
Key monitorables ---
Order inflows
Some clarity on when the FPO is likely to take place
Imposition of import duty on power equipments could be incrementally positive in the near term
* In the long run it is unlikely to have much positive effect given rising competition
* Foreign players setting up capacities in India
* The ambitious capacity expansion needs of the power sector which BHEL might not have enough capacity to cater to Watch the accompanying video for more...