Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BHEL
Below Expectations after
Excluding One-Time Income
Quick comment – bumped up by non-recurring
Income, numbers were in line: BHEL reported strong
numbers for the quarter, with its revenue for F3Q11 at
Rs88.5 bn moving up 25% YoY and net profits at Rs14
bn moving up 31% YoY. However, for the purpose of
comparison with earlier quarters, the numbers need to
be adjusted for one-time income. This arose because
BHEL modified its books to remove the mismatch in
recognition of revenue and creation of provision for
contractual obligation at 2.5% of the contract revenue on
completion of trial operation (Exhibit 3), with
retrospective effect.
Adjusted numbers, though still strong, below our
estimates on top line and bottom line, despite the
margin strength: Adjusted for the non-recurring
income, BHEL delivered 18% YoY growth in sales,
around 8% below our and consensus expectations. Net
profit at Rs13.4 bn was up 25% YoY, around 10% below
our estimate, but 4% ahead of consensus. Operating
margins were the bright spot for the quarter, moving up
130 bps to 21.5%, 100 bps ahead of our estimate
(20.5% for F3Q11e) and 170 bps ahead of consensus.
We draw no trends from either margin strength or
order inflow weakness in F3Q11: Other expenses
jumped 45% YoY (mainly via higher provisioning for
liquidated damages) – but staff costs (up only 1% YoY)
and raw material costs (up 18% YoY) more than made
up for it, pushing the EBITDA margins for the quarter up
130 bps YoY. On the other hand, order inflows, at Rs122
bn in F3Q11, were down 22% YoY, the second greatest
decline in the last five years (Exhibit 10). BHEL also
quoted the delays in ordering environment (like the other
heavyweight in the industry – L&T), as a reason for the
weaker inflows. However, given the historical volatility in
both material costs and order inflows, we prefer to wait
another quarter, rather than draw any trends based on
this quarter’s numbers.
We retain our Equal-weight Rating: Our call on the company
is based on longer-term issues of loss of its near monopoly
status in India and our expectation that the growing competition
from both foreign and domestic players will result in
compression of market share and margins. BHEL trades at a
12 months forward P/E of 17x on our estimates, at a 20%
premium to the broad market (Exhibit 9). While the
underperfomance over the last few months has brought the
premium to the market down to the lowest level in the last four
years, we still believe that the stock is priced for the
continuance of its near monopoly in the Indian Boiler Turbine
Generator market.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
BHEL
Below Expectations after
Excluding One-Time Income
Quick comment – bumped up by non-recurring
Income, numbers were in line: BHEL reported strong
numbers for the quarter, with its revenue for F3Q11 at
Rs88.5 bn moving up 25% YoY and net profits at Rs14
bn moving up 31% YoY. However, for the purpose of
comparison with earlier quarters, the numbers need to
be adjusted for one-time income. This arose because
BHEL modified its books to remove the mismatch in
recognition of revenue and creation of provision for
contractual obligation at 2.5% of the contract revenue on
completion of trial operation (Exhibit 3), with
retrospective effect.
Adjusted numbers, though still strong, below our
estimates on top line and bottom line, despite the
margin strength: Adjusted for the non-recurring
income, BHEL delivered 18% YoY growth in sales,
around 8% below our and consensus expectations. Net
profit at Rs13.4 bn was up 25% YoY, around 10% below
our estimate, but 4% ahead of consensus. Operating
margins were the bright spot for the quarter, moving up
130 bps to 21.5%, 100 bps ahead of our estimate
(20.5% for F3Q11e) and 170 bps ahead of consensus.
We draw no trends from either margin strength or
order inflow weakness in F3Q11: Other expenses
jumped 45% YoY (mainly via higher provisioning for
liquidated damages) – but staff costs (up only 1% YoY)
and raw material costs (up 18% YoY) more than made
up for it, pushing the EBITDA margins for the quarter up
130 bps YoY. On the other hand, order inflows, at Rs122
bn in F3Q11, were down 22% YoY, the second greatest
decline in the last five years (Exhibit 10). BHEL also
quoted the delays in ordering environment (like the other
heavyweight in the industry – L&T), as a reason for the
weaker inflows. However, given the historical volatility in
both material costs and order inflows, we prefer to wait
another quarter, rather than draw any trends based on
this quarter’s numbers.
We retain our Equal-weight Rating: Our call on the company
is based on longer-term issues of loss of its near monopoly
status in India and our expectation that the growing competition
from both foreign and domestic players will result in
compression of market share and margins. BHEL trades at a
12 months forward P/E of 17x on our estimates, at a 20%
premium to the broad market (Exhibit 9). While the
underperfomance over the last few months has brought the
premium to the market down to the lowest level in the last four
years, we still believe that the stock is priced for the
continuance of its near monopoly in the Indian Boiler Turbine
Generator market.
No comments:
Post a Comment