BHEL

BHEL’s Q1FY14 performance was a big disappointment and ditto for Q2FY14. The company has stated that current Q2 numbers includes financial results of HPVP unit (erstwhile BHPV). And the impact of this, in Q2 and H1FY14 includes turnover of Rs.17 crore and Loss before tax at Rs.191 crore. Thus the company has stated that the figures for the current reporting period are not comparable with the previously reported period figures. Despite this, if we do compare, YoY, the PSU posted a net profit at Rs.456 crore, down 64% and down 2% sequentially. But for the other income of Rs.498 crore, an almost 4 times YoY rise, the company could have slipped into the red, as was widely expected. In Q1, it was a forex gain which helped it cut down the fall in net profit. In terms of segment breakup, revenue from power fell 15% and EBIT was down 38%. Revenue from industry also fell 15% and it reported a loss of Rs.4 crore on the EBIT front. The performance of BHEL, the largest PSU capital goods company indicates the state of the economy – it shows that companies place orders but then do not pay and keep deferring the implementation given the general despondency of the economy. This cut back has affected topline and thus the bottomline. It has ended H1FY14, with a 58% drop in net profit at Rs.921 crore.

Outstanding order book was at Rs.1,02,300 crore, down 6% (QoQ) and YoY, fall was sharper at 17%. Going ahead, pain is expected to continue. There is no overnight improvement estimated in order inflow and the economy itself is expected to stay lackluster. The only bright spot for the company is the depreciating rupee. This makes imports from China pretty expensive and that might mean more orders for BHEL. Surprisingly, while domestic institutions are selling, FIIs are buying into the stock. As at end of Q2FY14, FII holding increased from 14.98% to 15.25% (QoQ) and that of DII fell from 12.23% to 11.96%.