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Informist, Wednesday, Jan. 22, 2025

 

By Rajesh Gajra

 

NEW DELHI – Major capital goods public sector company Bharat Heavy Electricals Ltd. is expected to report a second consecutive quarter of strong on-year rise in revenue from operations in the December quarter amid steady orders from customers. The revenue growth will help the government-owned company's operating profit margin during the quarter.

 

The government holds 63.17% stake in BHEL, as per shareholding data for Dec 31. Analysts also expect the operating margin of the company to benefit from operating leverage.

 

According to estimates by three brokerage firms, the net profit of BHEL is seen ranging from INR 1.45 billion by JM Financial Institutional Securities Pvt Ltd to INR 2.98 billion by Prabhudas Lilladher Pvt Ltd. The lower end of the estimates is up sharply from the year-ago quarter's net profit of INR 463 million and also from the net profit of INR 967 million for the previous quarter.

 

The revenue of the company for the December quarter may be between INR 66.18 billion, as per JM Financial's estimate, and INR 75.81 billion, as per Prabhudas Lilladher's estimate. The lower range of the estimates is above the revenue of INR 55.04 billion reported by the company a year ago and also higher than the revenue of INR 65.84 billion for the previous quarter. Estimates for the earnings before interest, tax, depreciation, and amortisation for the December quarter range from INR 3.04 billion by JM Financial to INR 5.31 billion by Prabhudas Lilladher.

 

For the quarter ended September, BHEL reported a 28% rise on a year-on-year basis, and a 20% sequential increase in revenue from operations at INR 65.84 billion. The company's consolidated net profit for Jul-Sept was INR 967 million, against a net loss of INR 583 million for the same quarter a year ago and a net loss of 2.13 billion for the previous quarter. Notwithstanding the earnings turnaround, shares of BHEL as of their closing of INR 205.46 on Wednesday, are down 5.3% from INR 216.85 on Oct 25, the trading day prior to Oct. 28, when the company announced its September quarter earnings.

 

BHEL's robust order book is "expected to translate to strong revenue growth" in the December quarter, Prabhudas Lilladher said in its preview report. Kotak Securities' institutional equities team estimates an increase of around 23% on year in revenue "driven by the power and industrial segments".

 

In the September quarter, the company's power segment revenue, which had a 76% share in total revenue, increased 24% on year but the revenue from the industry segment, which accounted for 24% of the total, jumped 48% on a year-on-year basis.

 

Around 79% of the company's outstanding order book of around INR 1.6 trillion at the end of September was from power sector clients, 19% was from industry clients, and 2% from overseas clients.

 

The operating margin of the company is seen steady and expanding in the December quarter by analysts. Kotak Securities estimates a 200 bps quarter-on-quarter expansion in the EBITDA margin of BHEL due to "operating leverage", but expects the gross margin to stay flat sequentially.

 

BHEL will detail its financial results for the December quarter on Tuesday. Post the announcement, analysts will look out for commentary or information on demand conditions in the last quarter of 2024-25 (Apr-Mar). Order book growth and conversion of past orders into revenue will also be monitored.

 

Another key monitorable will be the numbers of account receivables and provisions that the company will report in a supplemental report for the quarter immediately following the results disclosure. In the current financial year up to Sep. 30, the account receivables were at INR 374.75 billion, 8% higher than the same period in the previous financial year. Within account receivables, trade receivables jumped 21% to INR 90.45 billion, and contract assets increased just 4% to INR 284.30 billion.

 

According to the company, as on Sep 30, account receivables from clients from central government utilities accounted for 44% of the total, while state government utilities accounted for 39%. Private sector clients had a share of 14% in account receivables, while overseas clients had a 4% share. BHEL's write-off of provisions will also be monitored. In the September quarter, the company had written off INR 260 million of provisions, compared to INR 100 million a year ago.

 

Shares of BHEL ended 1.9% lower Wednesday at INR 205.46 on the National Stock Exchange.

 

Following are the Oct-Dec consolidated standalone earnings estimates for Indus Towers based on reports from three brokerage firms in descending order by the estimate of net profit:

 

Brokerage	Net sales	Net profit	EBITDA
	(In INR million)
Prabhudas Lilladher Pvt Ltd	75,813	2,978	5,307
Kotak Institutional Equities	67,589	1,893	4,232
JM Financial Institutional Securities Pvt Ltd	66,175	1,450	3,042
Average	69,859	2,107	4,193

 

End

 

Edited by Avishek Dutta

 

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