Motilal Oswal has come out with its third quarter (October-December) earnings estimates for the capital goods sector. The brokerage house expects Bharat Heavy Electricals (BHEL) to report a 11.2 percent degrowth quarter-on-quarter (down 55.7 percent Y-o-Y) in net profit at Rs 524 crore.
Sales of Bharat Heavy Electricals are expected to decrease by 4.8 percent Q-o-Q (down 16.4 percent Y-o-Y) to Rs 8397.9 crore, according to Motilal Oswal.
Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 47.8 percent Q-o-Q (down 45.4 percent Y-o-Y) to Rs 891.4 crore.
Motilal Oswal on Bharat Heavy Electricals:
BHEL continues to face maximum revenue de-growth compared to peers in the industry. For 3QFY14E, we model revenue de-growth of16 percent YoY, EBITDA margin of 10.6 percent v/s 6.4 percent in 1HFY14 and PAT de-growth of 56 percent. Pressure on margins is expected mainly on lower operating leverage due to slower pace of project execution.
Overall, the pace of order finalisation in utility power segment is expected to be constrained from near to medium term. However, we expect the cycle of utility power capex to start over the next 12-15 months (discussed in detail in our report titled - BTG ordering: Emerging from the eclipse).
Order inflow for 1HFY14 was INR 44.7 billion, down 49 percent YoY, as ordering activity continues to be dormant. BHEL recently received an order worth INR 10.2 billion in 3QFY14 from Neyveli Lignite for supply of steam turbine generator, associated auxiliaries and civil works.
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