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FY11 provisional results above expectations
BHEL’s FY11 adjusted revenues and profits increased by 20% and 33% YoY and
came 1% and 5% ahead of our estimates. This is primarily on account of material
and employee costs being lower than estimates and higher than expected other
income. BHEL met its orderflow guidance, despite delays in award of some large
contracts and has guided for 10% increase in orders in FY12. These results
demonstrate BHEL’s ability to sustain strong orderflow and avoid margin pressures
despite competition from Chinese and domestic suppliers. Maintain BUY.
Provisional results ahead of estimates
BHEL’s FY11 revenues and PAT grew by 27% and 40% YoY respectively. This was partly
on account of change in accounting policy relating to warranty provisions, leading to
revenues and PBT being higher by Rs24.6bn and Rs4.1bn respectively. Adjusted for the
same, revenues and PAT expanded by 20% and 33% respectively, and came 1% and
5% ahead of our expectations. For 4QFY11, adjusted revenues and profits rose by
37% and 36% YoY respectively, and came 19% and 15% ahead of our estimates. Our
conversations with management suggest that material cost fell by c.130bps in FY11, it
did not record any prior period wage adjustments and other income increased YoY.
Order flow guidance met despite delays in award of large projects
Despite delays in award of NTPC-DVC bulk tender and Rajasthan utility projects, BHEL
won orders of Rs605bn in FY11 (management guidance: Rs600bn; our expectation:
Rs597bn). Since delayed orders should get awarded over the next few months, order
pipeline remains strong. Management believes that orderflows in FY12 could be 10%
higher than FY11. BHEL’s current backlog provides revenue visibility up to FY14.
Capacity expansion on track; focus on technology upgradation
BHEL installed over 15GW of equipment in FY11, and is on track to expand its capacity
to 20GW by FY12-end. This should help the company post c.17% revenue Cagr over
the next few years. BHEL spent Rs10bn (up 21% YoY) on R&D spending in FY11; it is
also expanding its addressable market by introducing new products/ entering into new
businesses in the areas of transmission, transportation, nuclear, solar etc.
Maintain BUY
We upgrade our FY12-13 revenues by 1-3% in view of higher orderflows expectation
for FY12. To be on the conservative side, we are building in 140bps increase in material
costs in FY12 and thus earnings are largely unchanged. With employee costs settled,
operating leverage benefits flowing through and order inflows remaining strong, BHEL
is well positioned to deliver c.20% EPS Cagr over FY11-14. It is trading 1-sd below its
5-year average multiples and in line with Chinese equipment manufacturers though it
offers significantly higher growth and better return ratios. Maintain BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
FY11 provisional results above expectations
BHEL’s FY11 adjusted revenues and profits increased by 20% and 33% YoY and
came 1% and 5% ahead of our estimates. This is primarily on account of material
and employee costs being lower than estimates and higher than expected other
income. BHEL met its orderflow guidance, despite delays in award of some large
contracts and has guided for 10% increase in orders in FY12. These results
demonstrate BHEL’s ability to sustain strong orderflow and avoid margin pressures
despite competition from Chinese and domestic suppliers. Maintain BUY.
Provisional results ahead of estimates
BHEL’s FY11 revenues and PAT grew by 27% and 40% YoY respectively. This was partly
on account of change in accounting policy relating to warranty provisions, leading to
revenues and PBT being higher by Rs24.6bn and Rs4.1bn respectively. Adjusted for the
same, revenues and PAT expanded by 20% and 33% respectively, and came 1% and
5% ahead of our expectations. For 4QFY11, adjusted revenues and profits rose by
37% and 36% YoY respectively, and came 19% and 15% ahead of our estimates. Our
conversations with management suggest that material cost fell by c.130bps in FY11, it
did not record any prior period wage adjustments and other income increased YoY.
Order flow guidance met despite delays in award of large projects
Despite delays in award of NTPC-DVC bulk tender and Rajasthan utility projects, BHEL
won orders of Rs605bn in FY11 (management guidance: Rs600bn; our expectation:
Rs597bn). Since delayed orders should get awarded over the next few months, order
pipeline remains strong. Management believes that orderflows in FY12 could be 10%
higher than FY11. BHEL’s current backlog provides revenue visibility up to FY14.
Capacity expansion on track; focus on technology upgradation
BHEL installed over 15GW of equipment in FY11, and is on track to expand its capacity
to 20GW by FY12-end. This should help the company post c.17% revenue Cagr over
the next few years. BHEL spent Rs10bn (up 21% YoY) on R&D spending in FY11; it is
also expanding its addressable market by introducing new products/ entering into new
businesses in the areas of transmission, transportation, nuclear, solar etc.
Maintain BUY
We upgrade our FY12-13 revenues by 1-3% in view of higher orderflows expectation
for FY12. To be on the conservative side, we are building in 140bps increase in material
costs in FY12 and thus earnings are largely unchanged. With employee costs settled,
operating leverage benefits flowing through and order inflows remaining strong, BHEL
is well positioned to deliver c.20% EPS Cagr over FY11-14. It is trading 1-sd below its
5-year average multiples and in line with Chinese equipment manufacturers though it
offers significantly higher growth and better return ratios. Maintain BUY.
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