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| BHEL: Set to deliver the goods |
| Shobhana Subramanian / Mumbai Aug 12, 2009, 00:58 IST |
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A big order book should help the firm turn in strong revenues and profits in the current year.
 BHEL’s net profit for the June 2009 quarter, up just 22 per cent to Rs 471 crore, may have been below consensus estimates but the reasonably-strong order inflows of around Rs 13,000 crore were more than expectations and should put the engineering major on course for a good performance in the current year.
Besides, the company has already built enough capacity to execute orders quickly. What’s encouraging, apart from the huge order book of around Rs 1.24 lakh crore, is that a fairly large share of new business in the June quarter was from private sector clients. With clients such as Avantha and Hindalco, the company is hoping for orders worth Rs 55,000 crore by March 2010. Industry watchers say that many companies are preferring BHEL’s equipment over that of Chinese vendors. Meanwhile, BHEL reported a strong top line growth of 29 per cent (to Rs 5,600 crore) for the June 2009 quarter.
Although the rise in staff expenses had been pencilled in, a higher-than-expected raw material bill — up nearly 500 basis points — tempered expansion of the operating profit margin, which was up 60 basis points to 9.2 per cent. Raw material costs were high because the company used some high-cost steel inventories.
But with most of the older stock having been consumed, it should now benefit from lower prices. Revenues in the current year are expected to cross Rs 32,000 crore, a growth of 22-23 per cent over 2008-09.
Since April this year, the stock has risen 46 per cent compared with a move of 52 per cent for the Sensex. The underperformance is probably due to the fact that the stock isn’t cheap; at Rs 2,148, it trades at nearly 25 times estimated 2009-10 earnings.
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