Bhel’s Q4 FY09 and FY09 provisional results are in line with our estimates, with reported profit at Rs12 billion and Rs30 billion for Q4 FY09 and FY09 respectively.
Despite a 28% y-o-y jump in FY09 revenues, its PBT grew by a paltry 3% y-o-y, indicating lower margins. This was due to higher wage provisions at 25% towards pending wage settlement and consumption of high cost inventory.
Excluding this PBT and PAT would have been higher by ~21% and ~25% respectively. Lower material costs should improve operating margin to 20% by FY11.
Bhel’s FY09 order book stands at Rs1.1 trillion, 4.3x FY09 provisional revenues, thus providing strong revenue visibility. Its order inflow also remained strong at Rs596 billion, higher by 20% y-o-y.
During the year it received its maiden order for 800MW supercritical boiler for Krishnapatnam, 660MW supercritical turbine generator sets for NTPC’s Barh-II project and its first ever order for steam generators for 700MWe nuclear sets.
We expect earnings to grow by 34% CAGR over FY09-11. However the recent run up in the stock price leaves little room for upside, but we believe it will outperform the index, we recommend MARKET PERFORMER rating.