Bharat Heavy Electricals Ltd-Q4FY11 Result Update

8/6/2019 Bharat Heavy Electricals Ltd-Q4FY11 Result Update

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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.Email: [email protected]

LONG TERM INVESTMENT C ALL

Buy 24 May 2011

Company Report | Q4FY11 Result Update

Q4FY11 Result Highlights

Bharat Heavy Electricals Ltd (BHEL) top-line came marginally aboveUnicon’s estimates but operating profit and net profit was in line withour estimates.

Revenue at INR 183.8bn was higher by 31.9% on yearly basis. Growthin revenue was backed by 35.8% yearly growth in its Power businessand 17.8% in Industry segment. Revenue from Power and Industry isINR 151bn and 37bn respectively for the quarter under review. Theoperating profit margin at 23.4% was well above our estimates andexpanded by 276bps on yearly basis. In absolute terms, the operating

profit at INR 42.9bn was higher by 49.5% on yearly basis. The higheroperating profit margin was due to lower raw-material consumptioncost and staff cost as percentage of sales. During the quarter underreview, the interest outgo increased by 71% to INR 305Mn on yearly basis, due to higher working capital cycle and higher cost of fund.The net profit after tax at INR 27.9bn was higher by 46.5% (YoY). Thecompany has changed its accounting policy with regard to theprovisions of warranty, leave liability of employees and depreciationfor few of its asset class.

Order-book update

The current order-book of the company stands at INR 1.64tn andmanagement guides for ~5-10% growth in its order book during FY12.BHEL is L2 in NTPC’s bulk tender of 11x660MW turbine generatorand is expected to get 4/5 turbine-generator orders. Given the strongpipeline of power projects by private sector and likely order awardfrom the NTPC, the target looks achievable.

Other update

Company has announced that 5% of its paid up equity would bedivested by the GoI and face value (Rs 10/share) of its share would besub-divided into 5 equity shares of Rs 2 each.

Outlook & Valuation

At the CMP, stock trades at 12x its FY13e. Despite over hang remainsas to the likely FPO and concerns over incremental order-bookgrowth in the near term, we believe, stock currently trades atattractive valuation on price to earning multiple, and given the soundorder-book and RoE of ~30% on consolidated basis for FY11, Buy.

Industry Capital Goods

CMP (INR) 1,947Target (INR) 2,600

Upside / (Downside) (%) 33%52 week High/Low (INR) 2,694 / 1901

Market Cap (INR BN) 953

3M Avg. Daily Vol (‘000) 838P/E (FY13e) 12

Shareholding Pattern (%)

Promoters

67%

Institutions26%

Non

Institutions6%

Stock Performance

1900

2050

2200

2350

2500

2650

2800

2950

M a y

J u n

J u l

A u g

S e p

O c t

N o v

D e c

J a n F e b

M a r

A p r

BHEL NSE Nifty

Performance (%)

1MMonth

3Months

1 Year

Company -6.2% -7.8% -16.1%

NIFTY -8.5% -1.3% 9.0%* Source: Capitaline(INR in Mn)

Particulars Actual EstimatesTotal Income 183,805 171,129EBIDTA 42,936 42,043Reported PAT 27,980 26,183* Source: ACEEquity, Unicon Research

AnalystFalgesh Sanghvi | [email protected]




Summarized Income statement (Standalone) (INR in mn) Q4FY11 Q4FY10 YoY FY11 FY10 YoY

Income from Operation 183,805 139,446 31.8 424,955 335,728 26.6Total Expenditure 140,869 110,718 27.2 335,328 273,145 22.8EBITDA 42,936 28,728 49.5 89,627 62,583 43.2EBITDA (%) 23.4 20.6 276 bps 21.1 18.6 245 bpsDepreciation 1,384 1,647 - 5,441 4,580 18.8EBIT 41,552 27,081 53.4 84,186 58,003 45.1EBIT (%) 22.6 19.4 319 bps 19.8 17.3 253 bpsInterest 305 178 71.3 547 335 63.3Other income 1,634 2,080 - 6,418 8,239 -PBT 42,881 28,983 48.0 90,057 65,907 36.6PBT (%) 23.3 20.8 255 bps 21.2 19.6 156 bps

Tax Provision 15,678 10,475 30,759 23,192Prior period tax (777) (588) (814) (392)Net Profit 27,980 19,096 46.5 60,112 43,107 39.4Net Profit (%) 15.2 13.7 153 bps 14.1 12.8 131 bps

EPS 57 39 123 28

Expenditure Break-up and analysis Q4FY11 Q4FY10 YoY FY11 FY10 YoYChange in Stocks and WIP 6,669 (248) (1,273) (7,867)Consumption of raw materials 82,932 80,520 11.6 226,707 200,941 16.8

% of Sales 48.7 57.6 -882 bps 53.0 57.5 -446 bpsStaff Cost 14,599 18,338 - 54,104 52,433 3.2

% of Sales 7.9 13.2 -521 bps 12.7 15.6 -289 bps

Other expenditure 36,669 12,108 202.8 55,790 27,638 101.9% of Sales 19.9 8.7 1127 bps 13.1 8.2 490 bps

Segment Performance Q4FY11 Q4FY10 YoY FY11 FY10 YoYPower 151,444 111,549 35.8 347,914 268,607 29.5

PBIT (%) 27.3 27.4 -10 bps 23.9 23.5 37 bpsIndustry 37,091 31,491 17.8 91,860 78,790 16.6

PBIT (%) 26.6 25.6 100 bps 20.8 20.8 0 bpsSource: Company, Unicon Research




Unicon Investment Ranking Methodology

Rating Buy Accumulate Hold Reduce Sell

Return Range >= 20% 10% to 20% -10% to 10% -10% to -20% <= -20%

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Bharat Heavy Electricals Ltd-Q4FY11 Result Update

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