State-run power equipment manufacturer Bharat Heavy Electricals' (BHEL) reported performance is likely to remain constrained, impacted by muted execution in July-September quarter. Profit is seen rising 22.2 percent year-on-year to Rs 152 crore on higher other income but revenue may fall 8 percent to Rs 5,650 crore during the quarter, according to analysts polled by CNBC-TV18. Earnings will be announced on November 6.
Decline in revenue may be led by weaker execution due to lower offtake by state electricity boards (SEBs) and leveraged balance sheets of independent power producers (IPPs - 2/3rd of its order book comes from the power segment).
Analysts say poor pricing in recent orders and weak execution leading to negative operating leverage may be offsetting positives of lower raw material costs and employee expenses.
Operating profit may tank 31 percent to Rs 202 crore and margin may contract 116 basis points to 3.6 percent compared to year-ago period.
Order inflows, order book
Order inflow may remain muted due to delay in finalisation of L1 orders. Analysts say around 25 percent of order book is slow moving.
They expect order book at Rs 1,14,300 crore and inflow in range of Rs 2,000-5,000 crore for the quarter.
Additionally, BHEL has been asked to stop work at its 1320MW Ennore power station in Tamil Nadu followed by an order of Madras High Court to cancel contract on the grounds that BHEL may not be lowest bidder for project (Rs 9,000 crore). Key factors to watch out for would be order execution & new order pipeline, trend in provisions (particularly towards liquidated damages on project completions) and retirements. In 2015, 2,200 employees retired and for Q2FY16, analysts expect retirements from more than 700 employees.
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