BHEL Q1 profit seen up 12%, order inflow may be robust

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Bharat Heavy Electricals' (BHEL) first quarter net profit is seen rising 12.2 percent year-on-year to Rs 217 crore on strong operational performance. Revenue may increase 2.2 percent to Rs 5,181 crore from Rs 5,068 crore during the same period, according to average of estimates of analysts polled by CNBC-TV18.

The range for expected topline, bottomline and operating profit is big. The minimum profit expected by analysts is Rs 117 crore and maximum Rs 404 crore for the quarter. The range of revenue is Rs 4,054-6,186 crore and operating profit Rs 150-658 crore.

BHEL’s reported performance is likely to remain constrained, impacted by muted execution. Sales growth may be impacted by ongoing execution issues for about 2/3rd of its order book from the power segment.

Considering the range, revenue growth could surprise in June quarter because of inflated low base in Q1FY15, when BHEL reported 20 percent decline in revenue.

Going forward, BHEL may benefit from the execution of stalled projects, feel analysts.

Operating profit (including other operating income) may climb 37.1 percent year-on-year to Rs 299 crore and margin may expand 150 basis points to 5.8 percent in June quarter, which is likely to be supported by low base in Q4FY15, lower commodity prices and normative run-rate in provisions.

The company has been putting in serious efforts towards employee rationalisation, which is expected to further aid margin expansion.

Order inflows/order book

BHEL is expected to register robust order inflows, driven by largest ever EPC order for Rs 18,000 crore from Telengana for Yadadri Power Plant (4 GW project - 5 x 800 MW). Analysts expect order inflow at around Rs 19,000-20,000 crore for Q1 against total order intake of Rs 30,800 crore for entire FY15. Key factors to watch to watch out for:-Potential signs of improvement in execution and working capital cycle-Trend in provisions, particularly towards liquidated damages on project completion-Retirements of 2,200 employees in FY15 helped boost margin. Some analysts expect another batch of more than 700 employees to get retirement in Q1FY16.