Friday, January 27, 2012

>BHEL: Major Orders declared during Q3FY12 are Dainik Bhaskar Power Ltd, SCCL & Arcelor Mittal - Ukraine

 Weak Order inflows – Uncertain to meet its guidance
Order intake declared in 3QFY12 has been to the tune of `79bn as compared to `122bn declared in Q3FY11 down by ~35%, indicating a possibility of weak order inflows. We believe it to be a herculean task for BHEL to meet its order inflow guidance of `660bn as total order inflows declared till date has been `247bn in FY12, falling short of guidance by `413bn. More than 50% of its order inflow guidance will have to be met in Q4FY12.

Major Orders declared during Q3FY12 are

Average Revenue growth of around 22% & Pat growth of around 4%
With an order backlog of `1610bn as of Q2FY12, we expect an average growth of ~22% with an execution ratio of close to 31% & carrying a revenue visibility of more than 3yrs. With steel prices stabilizing at current market prices, we estimate reduction in consumption of its raw material as a % of sales. We expect an average PAT growth of around 4% with reduced PAT margins @13.5% as against 15.9% yoy.

Uncertain Long-term growth
The long-term outlook for order inflow remains uncertain given the fuel pressure – the domestic coal shortage coupled with high imported coal prices and competition in the BTG space from both domestic and international peers.