BHEL - March 2013 Results Preview - Motilal Oswal

- We expect revenue to decline by 3% YoY in 4QFY13E, impacted by a declining order book. Execution is likely to be constrained, particularly in private sector orders.

- BHEL is expected to receive order awards of INR150-200b in 4QFY13, which is a significant improvement over INR107b in 9MFY13. During January 2013, it already received orders of ~INR45b. The bidding pipeline in power segment is showing signs of improvement, with 1,800MW projects under evaluation, 5,300MW bids to be submitted in 4QFY13 and 7,000MW for which bids will be submitted in 1HFY14.

- We expect EBITDA margin would be impacted by negative operating leverage.

Net working capital, excluding cash, was at 36% of sales in 1HFY13, up from 28% of sales at end-March 2012 and 21% at end-March 2011. We believe BHEL is likely to face continued pressure on working capital due to falling customer advances and tightening liquidity conditions. Company has slowed down execution of some projects where customers are delaying payments.

Source : Equity Bulls

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