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Robust performance despite one-offs…
Bharat Heavy Electricals (Bhel) reported a strong operating performance
for Q3FY11. Revenues at | 9023 crore were above Street estimates
though it included revenues worth | 444 crore owing to a change in
accounting policy. The key highlight was the robust EBITDA margin
driven mainly by better vendor management, high labour productivity
and better raw material management. Reported EBITDA margins stood
at 23.4% for Q3FY11 vs. our estimate of 19.6%. Subsequently, PAT grew
31% YoY to | 1403 crore (this includes | 60 crore of one-off change in
accounting policy). Going ahead, the company is on track to meet its
FY11 guidance in terms of order inflows of | 60000 crore.
ƒ Revenues in line but operating margins surprise
Revenue growth of 21% YoY (excluding one-off) was in line with
consensus estimates but what surprised on the upside was the sharp rise
in EBITDA margin (up 136 bps YoY) to 23.4%. This was on the back of
better vendor management, high labour productivity and better raw
material management. Going ahead, we believe the huge back log and
incremental addition in capacity will drive revenue CAGR of 19% over
FY10-FY13E.
ƒ Order inflow guidance intact ,backlog provides reasonable comfort
The order backlog for Q3FY11 stood at | 158000 crore, thereby providing
reasonable comfort on revenue visibility (book to bill ratio of 4.1x). The
order inflow stood at | 12600 crore with ~62% coming from the power
segment. Going ahead, the management expects to meet its order inflow
guidance of | 60000 crore for FY11E. Order inflow for 9MFY11 stood at |
37000 crore, up ~2% YoY.
Valuation
We continue to value Bhel on a DCF basis and have derived a target price
of | 2641 per share. We believe consistently delivering high operating
margins via achieving efficiency and expansion in operations will help
Bhel further to improve its execution capacity. This is backed by a robust
book to bill ratio of 4.2x rendering reasonable visibility on earnings. We
maintain our BUY rating on the stock.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Robust performance despite one-offs…
Bharat Heavy Electricals (Bhel) reported a strong operating performance
for Q3FY11. Revenues at | 9023 crore were above Street estimates
though it included revenues worth | 444 crore owing to a change in
accounting policy. The key highlight was the robust EBITDA margin
driven mainly by better vendor management, high labour productivity
and better raw material management. Reported EBITDA margins stood
at 23.4% for Q3FY11 vs. our estimate of 19.6%. Subsequently, PAT grew
31% YoY to | 1403 crore (this includes | 60 crore of one-off change in
accounting policy). Going ahead, the company is on track to meet its
FY11 guidance in terms of order inflows of | 60000 crore.
ƒ Revenues in line but operating margins surprise
Revenue growth of 21% YoY (excluding one-off) was in line with
consensus estimates but what surprised on the upside was the sharp rise
in EBITDA margin (up 136 bps YoY) to 23.4%. This was on the back of
better vendor management, high labour productivity and better raw
material management. Going ahead, we believe the huge back log and
incremental addition in capacity will drive revenue CAGR of 19% over
FY10-FY13E.
ƒ Order inflow guidance intact ,backlog provides reasonable comfort
The order backlog for Q3FY11 stood at | 158000 crore, thereby providing
reasonable comfort on revenue visibility (book to bill ratio of 4.1x). The
order inflow stood at | 12600 crore with ~62% coming from the power
segment. Going ahead, the management expects to meet its order inflow
guidance of | 60000 crore for FY11E. Order inflow for 9MFY11 stood at |
37000 crore, up ~2% YoY.
Valuation
We continue to value Bhel on a DCF basis and have derived a target price
of | 2641 per share. We believe consistently delivering high operating
margins via achieving efficiency and expansion in operations will help
Bhel further to improve its execution capacity. This is backed by a robust
book to bill ratio of 4.2x rendering reasonable visibility on earnings. We
maintain our BUY rating on the stock.
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