BHARAT HEAVY ELECTRICALS LIMITED (FINANCIAL RESULTS – Q2, 2008-09)

HIGHLIGHTS
Performance of Bharat Heavy Electricals, the PSU power equipment major has beenmixed for the quarter ended Sep 2008. While the revenue for the quarter grew at 35% onan empirically weak quarter, the performance at operating level has been subdued withjust a growth of 2% on account of sharp 420 basis points contraction in operating marginto 13.3%. But the net profit eventually de-grew by 10% to Rs 615.8 crore.Order book of the company as end of Sep 2008 was Rs 104000 crore fortified by anorder intake of Rs 14350 crore in the Q2FY09. Order backlog as end of sequentialprevious quarter ended Jun ’08 was Rs 95000 crore and Rs 85000 crore as end of Mar’08

RESULT ANALYSIS

Revenue
On a empirically a weak quarter of Sep 2008, the company’s value of production (net of excise) stoodhigher by 33% to Rs 5763 crore on account of burnout of strong order book. The net sales for the quarterwere higher by 35% to Rs 5342.60 crore. Upside at revenue level mostly came from power segment asthe segment revenue growth of both Power and Industry have registered strong double digit growth forthe quarter.

Operating profit

Operating margin contracted by 420 basis points (bps) to 13.3%. While the other expenses were lower asa proportion to sales net of stocks, the staff cost and material cost were higher more than negating thegain at other expenses. Material cost was higher by 410 basis points to 62.6% and that of staff cost washigher by 90 basis points to 15.4%. However the other expenses were lower by 130 basis points to 9.7%.This led to a marginal growth in operating profit of 2% to Rs.710.7 crore against Rs.695.2 crore in thecorresponding previous quarter.
Net Profit
Other income (excluding the interest on income tax refund for earlier years amounting Rs 250 crore in Q2FY08 & was taken to EO) grew by 22% to Rs 307.20 crore. Interest cost was lower by 89% to Rs 2.20crore and depreciation was up by 7% to Rs 74.3 crore. Spurred by higher other income, the growth atPBT level improved to 10% (to Rs 941.40 crore).EO item for the quarter was nil compared to Rs 250 crore in the corresponding previous period onaccount of interest on income tax refund pertaining to earlier years. On an escalated base the PBT afterEO was lower by 15% to Rs 941.4 crore. Taxation was lower by 16% to Rs 325.60 crore and Prior periodadjustments for the quarter was nil as against Rs 31 crore in the corresponding previous period. Thus thenet profit eventually closed at Rs 615.80 crore, a fall of 10%