BHEL is targeting 10,000-MW power equipment supplies in the current fiscal
The slowdown in the economy and the power sector has taken its toll on the country’s largest power equipment maker Bharat Heavy Electricals Ltd (BHEL). In the three months to June, 2013, the company supplied equipment for a capacity of 1,500 MW or roughly 15% of the annual target for FY14. BHEL is targeting power equipment supplies worth around 10,000 MW in the current fiscal.
In FY13, the engineering behemoth supplied equipment for capacity of 15,000 MW, of which just over 10,000 MW of capacity was commissioned. Analysts expect the company to report a 14% y-o-y fall in profits in Q1FY14 on lower revenues, estimated to fall 2% y-o-y. Since May 30, the BHEL stock has lost 27% in value and closed at R150.65 on Thursday, falling nearly 5% over Wednesday’s close.
A senior BHEL executive told FE that the company was forced to reduce capacity utilisation at its main power equipment plant by over 60% since orders have been falling and deliveries delayed. The firm believes there will be a pick-up later in the year, albeit a marginal one. Analysts have pencilled in orders from utilities of 7 GW in FY14 on the back of an estimated 4.5GW last year.
Early last week, Larsen & Toubro (L&T) reported a poor set of numbers for Q1FY14, with net profits crashing 12% year-on-year to R756 crore on revenues that rose just 5% y-o-y to R12, 555 crore. The earnings before interest tax and depreciation (Ebitda) margins contracted 60 bps y-o-y to 8.5% leaving the operating profit flat at R1,071 crore. The results prompted the Street to become cautious on the capex cycle. “The results were very disappointing, especially the 5% top line growth and causes concerns the capex cycle is not turning in a hurry,” Manishi Raychaudhuri, Asia Pacific strategist, BNP Paribas had observed.
The company has reported fresh orders of about Rs 25,000 crore in 2012-13, taking the order backlog to Rs 1.25 lakh crore. The silver lining is that delayed power projects may start taking off from 2014, with the government resolving fuel linkage issues, BHEL may be able to bag more order. The firm’s bill book ratio remained flat 49% in FY13. Tenders for a capacity creation of 16,500 MW are expected over the next six to nine months.
Though this is sufficient to allow company to operate at over 90% capacity for next couple of years, drying of new orders has fuelled a concern of this size that needs outstanding order book for at least five years. BHEL also declared in April that it had nearly Rs 40,000 crore outstanding payments; the situation is understood to have improved marginally.
The slowdown in the economy and the power sector has taken its toll on the country’s largest power equipment maker Bharat Heavy Electricals Ltd (BHEL). In the three months to June, 2013, the company supplied equipment for a capacity of 1,500 MW or roughly 15% of the annual target for FY14. BHEL is targeting power equipment supplies worth around 10,000 MW in the current fiscal.
In FY13, the engineering behemoth supplied equipment for capacity of 15,000 MW, of which just over 10,000 MW of capacity was commissioned. Analysts expect the company to report a 14% y-o-y fall in profits in Q1FY14 on lower revenues, estimated to fall 2% y-o-y. Since May 30, the BHEL stock has lost 27% in value and closed at R150.65 on Thursday, falling nearly 5% over Wednesday’s close.
A senior BHEL executive told FE that the company was forced to reduce capacity utilisation at its main power equipment plant by over 60% since orders have been falling and deliveries delayed. The firm believes there will be a pick-up later in the year, albeit a marginal one. Analysts have pencilled in orders from utilities of 7 GW in FY14 on the back of an estimated 4.5GW last year.
Early last week, Larsen & Toubro (L&T) reported a poor set of numbers for Q1FY14, with net profits crashing 12% year-on-year to R756 crore on revenues that rose just 5% y-o-y to R12, 555 crore. The earnings before interest tax and depreciation (Ebitda) margins contracted 60 bps y-o-y to 8.5% leaving the operating profit flat at R1,071 crore. The results prompted the Street to become cautious on the capex cycle. “The results were very disappointing, especially the 5% top line growth and causes concerns the capex cycle is not turning in a hurry,” Manishi Raychaudhuri, Asia Pacific strategist, BNP Paribas had observed.
The company has reported fresh orders of about Rs 25,000 crore in 2012-13, taking the order backlog to Rs 1.25 lakh crore. The silver lining is that delayed power projects may start taking off from 2014, with the government resolving fuel linkage issues, BHEL may be able to bag more order. The firm’s bill book ratio remained flat 49% in FY13. Tenders for a capacity creation of 16,500 MW are expected over the next six to nine months.
Though this is sufficient to allow company to operate at over 90% capacity for next couple of years, drying of new orders has fuelled a concern of this size that needs outstanding order book for at least five years. BHEL also declared in April that it had nearly Rs 40,000 crore outstanding payments; the situation is understood to have improved marginally.
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