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FY11 preview
BHEL will release its FY11 provisional results on 4th April (Monday). We
expect 4QFY11 revenues to increase 17% YoY, implying a 20% growth in
FY11. Ebitda margins should expand by 129bps in 4Q (161bps for FY11),
as the company is unlikely to make any fresh prior period wage revision
provisions. We expect net profit of Rs23bn in 4Q, up 21% YoY and FY11
net profit at Rs55bn, up 28%. We believe orders should be broadly in line
with the management guidance and potential shortfall, if any on account
of delay in NTPC bulk-order, should be small. Outlook for FY12 orderflow
is good and we expect 23% EPS Cagr over FY11-14. Maintain BUY.
4QFY11 - 17% increase in revenues; 129bps increase in margins
We expect BHEL’s 4QFY11 revenues to expand by 16.8% YoY, to Rs158.3bn
and FY11 at Rs394.9bn, up 20.1% YoY. Our belief of revenue growth to slow
in 4Q, in comparison with 22.4% YoY growth in 9mFY11, is partly on account
of high base effect, given that revenues had risen by 29% YoY in 4QFY10
(23% in 9mFY10). We anticipate Ebitda margins to expand by 129bps YoY in
4QFY11, to 19.6%. This is despite our assumption of material costs going up
by 78bps as we expect employee costs to remain flat in 4Q leading to 208bps
saving. This is because BHEL had expensed ~Rs4bn prior period wage
revision provisions in FY10, which is unlikely to recur in FY11. Overall, we
anticipate Ebitda margin to improve by 161bps in FY11, to 18.5%.
Order inflows should be close to management guidance
BHEL’s management had earlier guided for Rs600bn of order inflows for FY11.
Given that the company had won Rs364bn worth of orders in 9mFY11, it
needs Rs233bn worth of orders in 4Q to meet its guidance. Of this, it has
announced orders of Rs122bn through press releases in 4Q; there would be
some unannounced orders as well. For instance, in 4QFY10, Rs106bn worth of
orders were announced through press releases, while actual order inflow
stood at Rs225bn. Thus orderflow should be largely in line with our estimates.
NTPC-DVC bulk tender and Rajasthan state utility’s orders should get awarded
over the next few quarters, boosting FY12 orderflow prospects.
Our top pick in capital goods space; maintain BUY
With employee costs settled and operating leverage benefits flowing through,
BHEL should be able to expand its Ebitda margins by c.200bps over FY11-14.
This should help the company deliver 23% EPS Cagr over the next three
years. BHEL remains our top capital goods pick in the region, offering strong
earnings growth, robust balance sheet, excellent revenue visibility and good
corporate governance. Maintain BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
FY11 preview
BHEL will release its FY11 provisional results on 4th April (Monday). We
expect 4QFY11 revenues to increase 17% YoY, implying a 20% growth in
FY11. Ebitda margins should expand by 129bps in 4Q (161bps for FY11),
as the company is unlikely to make any fresh prior period wage revision
provisions. We expect net profit of Rs23bn in 4Q, up 21% YoY and FY11
net profit at Rs55bn, up 28%. We believe orders should be broadly in line
with the management guidance and potential shortfall, if any on account
of delay in NTPC bulk-order, should be small. Outlook for FY12 orderflow
is good and we expect 23% EPS Cagr over FY11-14. Maintain BUY.
4QFY11 - 17% increase in revenues; 129bps increase in margins
and FY11 at Rs394.9bn, up 20.1% YoY. Our belief of revenue growth to slow
in 4Q, in comparison with 22.4% YoY growth in 9mFY11, is partly on account
of high base effect, given that revenues had risen by 29% YoY in 4QFY10
(23% in 9mFY10). We anticipate Ebitda margins to expand by 129bps YoY in
4QFY11, to 19.6%. This is despite our assumption of material costs going up
by 78bps as we expect employee costs to remain flat in 4Q leading to 208bps
saving. This is because BHEL had expensed ~Rs4bn prior period wage
revision provisions in FY10, which is unlikely to recur in FY11. Overall, we
anticipate Ebitda margin to improve by 161bps in FY11, to 18.5%.
Order inflows should be close to management guidance
BHEL’s management had earlier guided for Rs600bn of order inflows for FY11.
Given that the company had won Rs364bn worth of orders in 9mFY11, it
needs Rs233bn worth of orders in 4Q to meet its guidance. Of this, it has
announced orders of Rs122bn through press releases in 4Q; there would be
some unannounced orders as well. For instance, in 4QFY10, Rs106bn worth of
orders were announced through press releases, while actual order inflow
stood at Rs225bn. Thus orderflow should be largely in line with our estimates.
NTPC-DVC bulk tender and Rajasthan state utility’s orders should get awarded
over the next few quarters, boosting FY12 orderflow prospects.
Our top pick in capital goods space; maintain BUY
With employee costs settled and operating leverage benefits flowing through,
BHEL should be able to expand its Ebitda margins by c.200bps over FY11-14.
This should help the company deliver 23% EPS Cagr over the next three
years. BHEL remains our top capital goods pick in the region, offering strong
earnings growth, robust balance sheet, excellent revenue visibility and good
corporate governance. Maintain BUY.
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