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Informist, Wednesday, May 14, 2025

MUMBAI – State-owned capital goods major Bharat Heavy Electricals Ltd. is expected to post an on-year revenue growth for the March quarter but analysts are divided in their outlook for the company's net profit with one of three analysts expecting the company will post a decline in its profit.

Analysts' estimates for the public sector company's net profit for the March quarter range from a low of INR 4.6 billion to a high of INR 7.4 billion. While the lower end of the estimate band implies a decline of over 4% on year, the upper end denotes a rise of more than 50%.

Among the three estimates for the company's earnings, the highest is by JM Financial Institutional Securities Pvt. Ltd. and the lowest is by Kotak Institutional Equities. Prabhudas Lilladher Pvt. Ltd. expects the company to report a consolidated net profit of INR 7.3 billion for the quarter. BHEL's bottom line had fallen nearly 25% on year to INR 4.84 billion in the year-ago quarter. In the December quarter, the company's net profit was INR 1.25 billion, up 2.7 times on year .

Kotak Equities and Prabhudas Lilladher have provided estimates for BHEL's standalone financials for the March quarter, whereas JM Financial has provided estimates for the company's consolidated bottom line and top line. A closer look at the company's year-ago quarter earnings shows the difference between the consolidated and standalone figures is marginal. In the year-ago quarter, the company had reported a standalone net profit of INR 4.84 billion and a consolidated net profit of INR 4.90 billion, while the standalone and consolidated revenue figures were the same at INR 82.60 billion.

The  company's revenue for the March quarter is expected to range between INR 104 billion and INR 120 billion. The higher estimate is from Prabhudas Lilladher while the lower one is from Kotak. Prabhudas Lilladher estimates a more than 45% on-year rise in BHEL's revenue for the reporting quarter, driven by strong execution in its power segment. JM Financial credited notable execution, higher dispatches, and operating leverage for its estimate.

During the March quarter, BHEL disclosed order wins worth nearly INR 400 billion, Prabhudas Lilladher said in a note. Some major deals include an INR-80-billion order from Maharashtra State Power Generation Co. to build two power stations, a INR-67-billion order from Singareni Collieries for a thermal project, and an order worth INR 75 billion from Gujarat State Electricity Corp. Ltd. to supply power generating equipment, among others.

The company is expected to post earnings before interest, tax, depreciation and amortisation in the range of INR 7.8 billion to INR 11.7 billion for the March quarter. 

Kotak anticipates a 90-basis-point on-year improvement in the company's gross margin for the quarter, but a 130 basis-point contraction in its EBITDA margin on account of "normalisation in provisions". Prabhudas Lilladher expects the company's EBITDA margin to improve by nearly 92 basis points on year to almost 9.7% for the quarter. This improvement is expected to be aided by a better gross margin and employee cost partially offset by higher other expenses against a low base in the year-ago quarter, the brokerage said.

On Wednesday, shares of the company closed at INR 239.36 on the National Stock Exchange, up 0.4% from the previous day. It is up almost 28% from its closing price on Jan. 28, when the company reported its results for the December quarter. The stock is down nearly 29% from its 52-week high of INR 335.35. BHEL will announce its earnings for the March quarter on Friday.

Among the five research recommendations on the stock available with Informist, four have a 'buy' or equivalent rating on BHEL, while one has a 'sell' rating. The average target price of the ‘buy' recommendations is INR 317.

Following are the Jan-Mar earnings estimates for BHEL based on reports from three brokerage firms in descending order by the estimate of net profit (in million):

End

Reported by Shakshi Jain

Edited by Akul Nishant Akhoury

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