BHEL - 1QFY2013 Result Update - Angel Broking

BHEL reported better than expected numbers, however order flow for the quarter remains weak. For 1QFY2013 revenue came in better than expected at Rs.8,439cr (up 16.1%) against our expectation of Rs.7,781cr. EBITDA margins however came in slightly lower than expected at 14.2% (down 106bps) vs. our expectation of 15%. Order inflow remained subdued for the quarter coming in at Rs.5,590cr taking the total order book to Rs.132,900cr (OB coverage of 2.7x) down 16.7% yoy. Management expects overall, 10-15GW of power sector orders during the year and expects order inflow of Rs.60,000cr (1QFY2013 order flow at 9% of guidance). We find managements guidance optimistic and expect it to achieve ~Rs.31,000cr of order inflow during the year. We maintain our Neutral rating on the stock.

Better than expected revenue numbers: Revenue came in better than our expectations at Rs.8,439 (up 16% yoy) against our estimate of Rs.7,781cr. Both the segments- Power (17.2% yoy) as well and industry (19.3% yoy) showed strong revenue growth for the quarter. However, EBITDA margins came in at 14.2% (lower than expected) down from 15.3% (1QFY2012 reported number), mainly due to higher other operating expenses (provisions, power, freight etc). BHEL's PAT came in at Rs.921cr (up 12.8% yoy), however we note that other income which includes forex gain of ~Rs.130cr, boosted PAT.

Outlook and valuation: Given the strong competition (domestic as well as international), declining ordering flows and a weak capex cycle, we expect BHEL's profits, margins and ROE's to decline from current levels. The stock trades at 8.4x and 9.3x on our FY2013E and FY2014E estimates. We maintain Neutral on the stock.

Source : Equity Bulls

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