Basic EPS of the company stood at Rs. 5 -...
Transcript of Basic EPS of the company stood at Rs. 5 -...
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SYNOPSIS
BHEL is the largest engineering and manufacturing enterprise in India in the energy-related/infrastructure sector.
BHEL is a power plant equipment manufacturer with a current capacity to supply 15 GW per annum. The company targets to increase capacity to 20GW by 2012.
Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 19% over 2010 to 2013E respectively.
Bharat Heavy Electricals Limited (BHEL) has made its maiden entry in the Ukrainian market with an order for a Steam Turbine Generator (STG) package. Valued at nearly Rs.400 Million.
During the quarter, the company has reported Net Profit increased to Rs.14326.10 million from Rs.14032.30 million in previous year same quarter.
Years Net sales EBITDA Net Profit EPS P/E
FY 11 424955.10 96045.20 60112.00 122.80 2.12
FY 12E 489719.02 101950.90 64180.18 26.22 9.92
FY 13E 548485.30 115408.38 72595.12 29.66 8.77
Stock Data:
Sector:
Capital Goods/Electrical Equipment
Face Value Rs. Rs.2.00
52 wk. High/Low (Rs.) 450.20/225.00
Volume (2 wk. Avg.) 1297000
BSE Code 500103
Market Cap (Rs.In mn) 704908.8
Share Holding Pattern
1 Year Comparative Graph
BHEL BSE SENSEX
C.M.P : Rs.288.00 Target Price : Rs.330.00 Date : 15th Feb 2012 BUY
BHARAT HEAVY ELECTRICALS LTD
Result Update: Q3 FY 12
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Peer Group Comparison
Name of the company CMP(Rs.) Market
Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
BHEL 288.00 704908.8 122.80 2.12 0.63 311.50
Siemens 774.60 263592.4 19.76 39.20 6.91 300.00
Crompton Greav 143.70 92182.3 9.13 15.74 4.03 110.00
Investment Highlights
Q3 FY12 Results Update
Bharat Heavy Electricals Ltd disclosed results for the quarter ended Dec 2011.
Net sales for the quarter moved up 19% to Rs.107430.80 million as compared to
Rs.90233.20 million during the corresponding quarter last year. During the
quarter, the company has reported Net Profit increased to Rs.14326.10 million
from Rs.14032.30 million in previous year same quarter. The Basic EPS of the
company stood at Rs.5.85 for the quarter ended Dec 2011.
Quarterly Results - Standalone (Rs in mn)
As At Dec-11 Dec-10 %change
Net sales 107430.80 90233.20 19
PAT 14326.10 14032.30 2
Basic EPS 5.85 28.67 (80)
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Basic EPS of the company stood at Rs. 5.85
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Break up of Expenditure
Expenditure for the quarter stood at Rs.86626.30mn, which is around 25%
higher than the corresponding period of the previous year. Raw material cost of
the company for the quarter accounts for 60% of the sales of the company and
stood at Rs.64882.42mn from Rs.50856.90mn of the corresponding period of the
previous year. Staff cost decreased 1%YoY to Rs.13376.8mn from
Rs.13486.60mn and accounts for 12% of the revenue of the company for the
quarter.
OPM and NPM for the quarter stood at 21% and 13% respectively from 25% and
16% respectively of the same period of the last year.
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BHEL-developed India's first Ultra High Voltage AC 1200 kV Transformer
Bharat Heavy Electricals Limited (BHEL)’s sustained focus on developing new
technologies and products through in-house R&D initiatives with the successful
commissioning of India’s first 1200 kV Ultra High Voltage Alternating Current
(UHVAC) Transformer of 333 MVA rating.
The country’s first 1200 kV transmission line, the pinnacle of voltage levels in
the world, has been charged from BHEL's 1200 kV UHVAC transformer, at Bina
in MP. This is the first leap of the country towards excellence in UHVAC
systems and the establishment of the first commercial 1200 kV transmission
system in India is a rare accomplishment in the world.
BHEL further consolidates in the CIS region, Forays into Ukraine with
maiden order
Bharat Heavy Electricals Limited (BHEL) has made its maiden entry in the
Ukrainian market with an order for a Steam Turbine Generator (STG) package.
The contract for 27 MW STG package has been placed on BHEL by
ArcelorMittal group. Valued at nearly Rs.400 Million, the power generating
equipment will meet the Captive Power requirements of ArcelorMittal’s steel
plant at Kryviy Rih in Ukraine. BHEL’s scope of work in this contract includes
design, engineering, manufacture, supply and supervision of erection and
commissioning of 27 MW Steam Turbine & Generator Package including the
state of the art Controls and Instrumentation (C&I).
Company Profile
BHEL is the largest engineering and manufacturing enterprise in India in the energy
related sector. BHEL manufactures over 180 products under 30 major product groups
and caters to core sectors viz., Power Generation & Transmission, Industry,
Transportation, Telecommunication, Renewable Energy, etc. The company has 14
manufacturing divisions, four Power Sector regional centers, over 100 project sites,
eight service centers and 18 regional offices. BHEL has installed capacity of 15GB in
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power segment. BHEL supplied equipments account for more than 65% of the total
installed Thermal Generating capacity in India and contribute approx. 73% of the
Total Power Generation in the country.
Business Area
1. Power generation
Power Generation Sector comprises Thermal, Gas, Hydro and Nuclear power plant
business. BHEL-supplied sets account for 85,786 MW or around 64% of the total
installed capacity of 1,34,697 MW in the country. Significantly, these sets generated
an all-time high 454.59 Billion Units of electricity contributing 73% of the total power
generated in the country. The cumulative capacity of projects installed worldwide has
crossed 15GB. BHEL has proven turnkey capabilities for executing power projects
from Concept to Commissioning.
The company has introduced new rating thermal sets of 270 MW, 525 MW & 600 MW
in subcritical range and possesses the technology & capability to produce large
capacity thermal sets with super critical parameters and gas turbine-generator sets.
Co-generation and Combined cycle plants have been introduced to achieve higher
plant efficiencies. To make efficient use of the high ash content coal available in India,
BHEL also supplies Circulating Fluidized Bed Combustion (CFBC) boilers for thermal
plants. The Company manufactures 220/235/500/540 MWe, nuclear turbine-
generator sets. Custom-made hydro sets of Francis, Pelton and Kaplan types for
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different head-discharge combinations are also engineered and manufactured by
BHEL.
The Company has proven expertise in Plant Performance Improvement through
Renovation, Modernization and Uprating of a variety of power plant equipment,
besides specialized know-how of residual life assessment, health diagnostics and life
extension of plants. BHEL built thermal sets consistently exceed the national average
efficiency parameters and have achieved the highest-ever Plant Load Factor (PLF) of
80.4% during 2007-08, which is 2.5% higher than the national average. Operating
Availability (OA) was also he highest-ever at 86.7%.
BHEL is one of the few companies worldwide, involved in the development of
Integrated Gasification Combined Cycle (IGCC) technology which would usher in clean
coal technology. BHEL has set up Asia’s first 6.2 MW IGCC power plant with an
indigenously designed pressurised fluidised bed gasifier. The company has also signed
an MoU with APGENCO for setting up a 125 MW IGCC plant at Vijayawada.
a) Transmission:
BHEL is today a well established player in the field of power transmission with some
major products and systems in its range of manufacturing and supply. Transmission
Business Group in BHEL undertakes projects on turnkey basis covering the complete
engineering, procurement, supply, construction, commissioning and after sales,service
for AC switchyards/substations upto 400KV with capability upto 765 kV capability to
conduct System studies as required for above business. BHEL today is the market
leader in turnkey substation business of 220/400 KV class and is also the largest
transformer manufacturer in the country with the distinction of being the only Indian
company in the field of HVDC technology.
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b) Future Power Generation & Transmission requirements in India
Government of India has ambitious plans of adding new generation capacities of
77577 MW in the XIth 5-year plan (2007 to 2012) and another 82000MW is projected
to be added during the XIIth 5 year plan (ending 2017). The associated transmission
system for evacuation of power has been planned and inter-regional transmission
capacity has been planned to be enhanced to 37150 MW by end of XIth plan i.e.
March 2012.Major investments are planned for building high capacity transmission
highways consisting of 400KV and 765KV transmission lines and HVDC bipoles to
evacuate power from North Eastern region and Eastern regions of the country.
POWERGRID, the Central Transmission Utility in the country is also planning to move
to next higher voltage for the grid by setting up the first 1200KV transmission line by
2012-13. POWERGRID has projected that by 2025-26 there shall be around 35 nos
1200KV substations having 100,000 MVA transformation capacity.
2. Industries
BHEL manufactures and supplies major capital equipment and systems like Captive
power plants, Centrifugal compressors, Drive Turbines, Industrial boilers and
auxiliaries, Waste heat recovery boilers, Gas turbines, Pumps, Heat exchangers,
Electrical machines, Valves, Heavy castings and forgings, Electrostatic precipitators,
ID/FD fans, Seamless pipes etc. to a number of industries, like metallurgical, mining,
cement, paper, fertilizers, refineries & petro-chemicals etc., other than power utilities.
BHEL has also emerged as a major supplier of controls and instrumentation systems,
especially distributed digital control systems for various power plants and industries.
3. Transportation
Most of the trains in Indian Railways, whether electric or diesel powered, are equipped
with BHEL’s traction propulsion system and controls. The systems supplied are both
with conventional DC drives and state-of-theart AC drives. India’s first underground
metro at Kolkata runs on drives and controls supplied by BHEL. The company also
manufactures complete Rolling stock i.e. Electric locomotives up to 5000 HP and EMU
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coaches and Diesel Electric locomotives from 350 HP to 3100 HP for both mainline
and shunting duty applications.
BHEL also undertakes retrofitting and overhauling of rolling stock. In the area of
urban transportation, BHEL is geared up for turnkey execution of electric trolley bus
systems, light rail systems and metro systems. BHEL is contributing to the supply of
electrics for EMUs for 1500V DC & 25 kV AC to Indian Railways. Almost all the EMUs
in service in India are with the electrics manufactured and supplied by BHEL.
4. Renewable Energy
BHEL has been manufacturing and supplying a range of Renewable Energy systems
and products. It includes Solar Energy systems viz. PV modules, PV power plants,
Street lighting, Solar pumps and Solar water heating systems. A large number of small
hydro power stations have also been completed. In line with the efforts being made at
national level for development of remote areas, BHEL has commissioned six stand
alone Solar Photovoltaic (SPV) power plants of 3x110 KWp and 3x55 KWp capacities in
Sunderbans (West Bengal). 57 Sets of Solar PV operated petrol pumps are being
supplied to M/s HPCL to illuminate and run the company-owned petrol pumps
smoothly irrespective of Grid power outage.
a) Oil and Gas
BHEL is supplying onshore drilling rig equipment viz. Draw works, Rotary-table,
Traveling block, Swivel, Mast and Sub structure, Mud systems and Rig electrics to
ONGC and Oil India Ltd. Well heads & X-Mas tree valves upto 10,000 psi rating for
onshore as well as offshore application are being supplied to ONGC, Oil bIndia Ltd.
and Private Drilling Companies.
BHEL has also supplied Casing Support System, Mudline Suspension System and
Block Valves to ONGC for offshore application. It also has the capability to supply
complete onshore Drilling rigs, Super-deep drilling rigs, Desert rigs, Mobile rigs, Work
over rigs and sub-sea well heads. Currently, BHEL is executing orders for
refurbishment and upgradation of onshore Oil Rigs from ONGC & Oil India Ltd. BHEL
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has supplied GT driven centrifugal compressorpackages to GAIL India Ltd. for their
gas compressor stations for the Dahej - Vijaipur gas pipeline project.
5. International Business
BHEL has, over the years, established its references in 70 countries across all
inhabited continents of the world. These references encompass almost the entire range
of BHEL products and services, covering Thermal, Hydro and Gas-based turnkey
power projects, Substation projects, Rehabilitation projects, besides a wide variety of
products like Transformers, Compressors, Valves, Oil field equipment, Electrostatic
Precipitators, Photovoltaic equipment, Insulators, Heat Exchangers, Switchgears,
Castings and Forgings etc. Some of the major successes achieved by BHEL have been
in Gas-based power projects in Oman, Libya, Malaysia, Saudi Arabia, Iraq,
Bangladesh, Sri Lanka, China, Kazakhstan; Thermal power projects in Cyprus, Malta,
Libya, Egypt, Indonesia, Thailand, Malaysia,\ Sudan; Hydro power plants in New
Zealand, Malaysia, Azerbaijan, Bhutan, Nepal, Taiwan, Tajikistan, Thailand,
Afghanistan; and Substation projects & equipment in various countries. Execution of
these overseas projects has also provided BHEL the experience of working with world
renowned consulting organizations and inspection agencies.
The company has been successful in meeting then demanding requirements of
international markets in terms of complexity of work as well as technology, quality and
other requirements viz. HSE requirements, financing packages and associated O&M
services, to name a few.BHEL has proved its capability to undertake projects on fast-
track basis.
The company has also established its versatility to successfully meet the varying needs
of different sectors, be it captive power, utility power generation or the oil sector.
Besidesundertaking turnkey projects on its own, BHEL also possesses the requisite
flexibility to interface and complement other international companies for large
nprojects, and has also exhibited adaptability by manufacturing and supplying
intermediate products.The company is taking a number of strategic business
initiatives to fuel further growth in overseas business. This includes firmly
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establishing itself in target export markets, positioning of BHEL as a regular EPC
contractor in the global market both in utility and IPPm segments and exploring
various opportunities for setting up overseas joint ventures etc.
Financial Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in million) FY10A FY11A FY12E FY13E
12m 12m 12m 12m
Description
Net Sales 335728.10 424955.10 489719.02 548485.30
Other Income 8238.60 6418.10 8781.92 10099.21
Total Income 343966.70 431373.20 498500.94 558584.51
Expenditure -273145.10 -335328.00 -396550.04 -443176.12
Operating Profit 70821.60 96045.20 101950.90 115408.38
Interest -335.00 -547.30 -496.15 -535.84
Gross Profit 70486.60 95497.90 101454.75 114872.54
Depreciation -4580.10 -5441.20 -7282.77 -8739.33
Profit before Tax 65906.50 90056.70 94171.97 106133.22
Tax -22800.10 -29944.70 -29991.80 -33538.10
Profit after Tax 43106.40 60112.00 64180.18 72595.12
Equity Capital 4895.20 4895.20 4895.20 4895.20
Reserves 154278.40 196643.20 260823.38 333418.50
Face Value(Rs.) 10.00 10.00 2.00 2.00
Total No. of Shares 489.52 489.52 2447.60 2447.60
EPS 88.06 122.80 26.22 29.66
*A=Actual, *E=Estimated *Due to Stock Split Face Value Change from Rs.10/- to Rs.2.00
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Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in million) 30-Jun-11 30-Sep-11 31-Dec-11 30-Mar-12
3m(A) 3m(A) 3m(A) 3m(E)
Description
Net Sales 72714.60 105455.10 107430.80 204118.52
Other Income 2486.50 2198.60 1960.20 2136.62
Total Income 75201.10 107653.70 109391.00 206255.14
Expenditure -61582.30 -85863.10 -86626.30 -162478.34
Operating Profit 13618.80 21790.60 22764.70 43776.80
Interest -88.00 -96.40 -145.00 -166.75
Gross Profit 13530.80 21694.20 22619.70 43610.05
Depreciation -1709.10 -1888.10 -1861.40 -1824.17
Profit before Tax 11821.70 19806.10 20758.30 41785.87
Tax -3666.60 -5685.80 -6432.20 -14207.20
Profit after Tax 8155.10 14120.30 14326.10 27578.68
Equity Capital 4895.20 4895.20 4895.20 4895.20
Face Value(Rs.) 10.00 10.00 2.00 2.00
Total No. of Shares 489.52 489.52 2447.6 2447.6
EPS 16.66 28.85 5.85 11.27
*A=Actual, *E=Estimated *Due to Stock Split Face Value Change from Rs.10/- to Rs.2.00
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Key Ratio
Particulars FY10 FY11 FY12E FY13E
EPS (Rs.) 88.06 122.8 26.22 29.66
EBITDA Margin (%) 21.09% 22.60% 20.82% 21.04%
PAT Margin (%) 12.84% 14.15% 13.11% 13.24%
P/E Ratio (x) 24.97 2.12 9.92 8.77
ROE (%) 27.08% 29.83% 24.15% 21.46%
ROCE (%) 41.28% 44.59% 35.40% 31.36%
EV/EBITDA (x) 15.20 1.33 6.24 5.51
Debt-Equity Ratio 0.01 0.01 0.01 0.005
Book Value (Rs.) 325.16 411.71 108.56 138.22
P/BV 6.76 0.63 2.39 1.88
Charts:
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Outlook and Conclusion
At the current market price of Rs.288.00, the stock is trading at 9.92 x FY12E and 8.77 x FY13E respectively.
Price to Book Value of the stock is expected to be at 2.39 x and 1.88 x respectively for FY12E and FY13E.
Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.26.22 and Rs.29.66 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 19% over 2010 to 2013E respectively.
Bharat Heavy Electricals Limited (BHEL) has made its maiden entry in the Ukrainian market with an order for a Steam Turbine Generator (STG) package. Valued at nearly Rs.400 Million.
During the quarter, the company has reported Net Profit increased to Rs.14326.10 million from Rs.14032.30 million in previous year same quarter.
On the basis of EV/EBITDA, the stock trades at 6.24 x for FY12E and 5.51 x for FY13E.
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We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.330.00 for Medium to Long term investment.
Industry Overview
Electrical equipment industry:
Recovery in India’s manufacturing sector is in full swing. While revival of automation
projects — typically one of the first indicators for any growth in the economy — is
already under way, an 11.3% rise in the electrical equipment industry has
underscored the overall growth story in the world’s second fastest growing economy.
The Rs 52,000-crore industry, which sells cables, switchgears, transformers and other
large electrical products, saw a major part of its growth come in the second half of
2009-10, after liquidity improved and companies resumed expansion plans.
According to the Indian Electrical and Electronics Manufacturers Association (IEEMA),
an apex body representing the Indian electrical equipment industry, the sector grew
about 20% in the second quarter, compared with 1.7% in the first half. “This demand
growth could likely see a two-fold increase in the next 2-3 years.Adding that this was
due to a pick-up in housing and construction.
Some of the companies in this sector are Siemens, L&T, ABB, Crompton Greaves,
Schneider Electric and WS Industries. Coming after a lull of two years, the growth in
electricals will strengthen policy measures as the government is working to restrict
Chinese power equipment makers. “Since spends on automation and electricals in any
project are equal, it was expected that growth in automation would also give a boost to
the electricals sector.Also as prices of electrical equipment are typically stable unlike
that of the automation sector, higher electricals sales implies that projects have been
revived.
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The industry has posted a 30% growth in the fourth quarter in sales of rotating
machines, switchgear and cables as a recovery in real estate and infrastructure
pushed up the demand for such products. The growth in demand mainly came from
industries such as power, textile, steel and cement. Analysts and industry experts said
the growth will be sustained as most of the transmission and distribution projects are
likely to begin in the next fiscal year, mainly by the Power Grid Corporation.
Demand for power equipment is expected to rise as India is targeting at least 9% GDP
growth for the year ahead.India has historically faced a demand-supply gap and this
will feed the electricals industry.
However, most of the orders would be through EPC route with more new players
entering the business and sub-contracting the same to existing contractors. It is
expected that competition would be intense. The government plans to add about
12,000 mw of capacity by the end of this fiscal, including from renewable sources. The
Central Electricity Authority has set a target to add more than 21,000 mw capacity by
the end of 2012.
The government has also taken policy initiatives to speed up power sector
development, such as the Rajiv Gandhi Gramin Vidyutikaran Yojana. “The power
sector reforms if implemented as scheduled will create large business for power sector
equipment manufacturers and service providers.
______________ ____ _________________________ Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
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