BHEL net down 10% stock dips

Government-owned power equipment maker Bharat Heavy Electricals Ltd (BHEL) disappointed the markets by reporting a 9.8 per cent fall in net profit at Rs 1,274 crore during the second quarter ended September 30. Revenue, too, grew marginally to Rs 10,399 crore from Rs 10,299 crore year-on-year (y-o-y). Shares of the company closed six per cent down on the Bombay Stock Exchange following the earnings announcement.

Analysts had expected a net profit of Rs 1,446 crore on revenues of Rs 11,448 crore for the quarter. Revenues grew marginally, by one per cent, to Rs 10,600 crore on the back of declining order backlog. According to an analysis by Emkay Global, the Ebitda margins were up 20 basis points (bps) y-o-y to 18 per cent compared to estimates of 17.9 per cent. Ebitda grew two per cent to Rs 1,900 crore, against estimates of Rs 1,840 crore. BHEL’s outstanding order book (Rs 1.22 lakh crore) was down a fourth compared to last year. Order inflow has been impacted due to structural issues related to coal linkages, environment/forest clearances, land acquisition and gas availability.

Industrial orders also remained weak.

In a recent report on the sector, ICRA said though an aggregate generation capacity of 54,000 Mw is likely to be added by the private sector in the XII Plan period (2012-17), capacity addition, FY2015-16 on, and in the next Plan period, could be adversely affected. Deferment of fresh investment plans and slow progress in revival of many projects under planning stage as a result of several structural issues in the sector are the underlining reasons for the same. This could pose a problem for companies like BHEL, whose major portion of business comes from the power sector.

Though the power sector outlook is worrying analysts, the company's non-power business segment showed a decline in revenue to Rs 2,054 crore for the quarter ended September 30, against Rs 2,960 crore last year.

Profit from this segment almost halved to Rs 438 crore.