New Delhi: Bharat Heavy Electricals Ltd (BHEL), India’s top power equipment maker, expects new order growth to accelerate to 10% in the new fiscal year, giving it breathing room if projects continue to be delayed by procedural hold-ups.
The state-run firm on Monday posted a higher-than-expected 40% rise in provisional 2010/11 net profit, sending its shares up more than 3%, and said revenue in the year that started 1 April should rise to $10-$11 billion from $9.8 billion in the year ended 31 March.
The revenue target will be met mostly from the existing order book, BHEL chairman and managing director B. Prasada Rao told reporters, adding he expects new orders in 2011/12 to grow at least 10% against 2.5% growth in the previous fiscal year.
Shares in BHEL, valued by the market at $23.2 billion, rose as much as 3.7% after the results were announced. The stock closed 2.8% higher at Rs2,173.80 in a firm Mumbai market.
“I won’t be surprised if order growth remains flat this year, but if the pace of translating into revenue remains good, it is a comfortable situation,” said Harshad Shukla, sector analyst at K R Choksey Shares & Securities.
“The results are above expectations, especially in managing costs and maintaining margins,” he said.
BHEL, which faces intensifying competition from Chinese and South Korean rivals, won new orders worth Rs60500 cr ($13.6 billion) in the fiscal year ended 31 March, just above its target of 60000 cr.
It had an order backlog of Rs163999.99 cr at the end of March after large order wins late in the month helped it overcome a slowdown.
“The silver lining in all this is more number of projects are happening. So if some projects get bogged down with clearances, there are other projects that will happen,” Rao said.
Last month, Rao told Reuters the firm was facing a slowdown in domestic orders due to delays in environmental clearances, coal linkages and financial closures - a problem faced by other infrastructure builders in India over the past six months or so.
Rival Larsen & Toubro warned in January it might not meet its full-year order book growth target.
BHEL said provisional net profit rose to Rs6020 cr in 2010/11 from Rs4310 cr a year earlier, while provisional turnover climbed 27% to Rs43450 cr.
India faces a peak-hour power shortage of nearly 14% and utility companies are expanding capacity to satisfy a rapidly urbanising population and rising industrialisation.
The country aims to halve its peak-hour power deficit within two years and add generation capacity of 100,000 MW during 2012-17, but delays relating to land acquisition, environmental issues and coal sourcing have hampered growth in recent months.
BHEL earns 70% of its revenue from power equipment but is also trying to boost its business in the transmission and transportation equipment segment, where it sees high growth.
The shares have, however, fallen nearly 6.5% so far in 2011, against a 4% decline in the main stock index.