Bhel September quarter net up 39% as material costs slide

Bhel September quarter net up 39% as material costs slide

New Delhi: Lower material costs helped equipment maker Bharat Heavy Electricals Ltd (Bhel) post a 39.31% rise in net profit in the three months ended 30 September, compared with the same period a year ago.

Net profit was Rs857.9 crore in the second quarter of the current fiscal to March, compared with Rs615.8 crore a year ago. Revenues rose 24% to Rs6,625.2 crore.

“While the revenue growth was expected, after the economic slowdown, the cost of material sourced has come down due to the dip in the commodity prices," chairman and managing director B.P. Rao said. “On a quarter-to- quarter comparison, we have managed a 3% decrease in the material cost. We expect to close this financial year with a 2% reduction in material cost."

India’s largest manufacturer of power generation equipment said it has orders to supply Rs1,25,800 crore worth of machinery. Analysts were surprised by the state-owned company’s performance.

Madanagopal R., an equity research analyst who tracks Bhel at Mumbai-based brokerage Centrum Broking Pvt. Ltd, wrote in a report that the “jump in margin was a surprise".

“Overall results were above our expectation at the margin level. Segment-wise margins have improved in both power and industry segment, but industry segment registered lower growth of 6.6% in revenue y-o-y," he said.

India has a power generation capacity of 147,000MW and plans to add 78,577MW by 2012. Of these, orders for a capacity of 42,431.58MW have been placed with Bhel.

The firm posted a net profit of Rs3,039 crore on revenue of Rs27,505 crore in the year ended 31 March. It aims to become a $10 billion-plus (Rs46,500 crore) firm by 2012. Bhel has an annual capacity to manufacture power equipment that can produce 10,000MW of electricity.

The company’s market share is expected to decline due to the competition from Chinese firms and several private sector consortia planning to make inroads into the domestic market. They include Toshiba Corp. of Japan along with JSW Group; Ansaldo Caldaie SpA of Italy and GB Engineering Enterprises Pvt. Ltd; Larsen and Toubro Ltd and Mitsubishi Heavy Industries Ltd of Japan and Bharat Forge Ltd and Alstom SA of France.

Bhel’s stock on Friday fell 1.56% to Rs2,384.30 at close on the Bombay Stock Exchange. The exchange’s benchmark Sensex index gained 0.13% to 16,810.81 points.