Dear All,
Forwarding you the Result Flash on BHEL for 4QFY2011 with a Neutral Recommendation.
v Revenues lower than our estimates: BHEL reported 31.8% yoy growth in the top-line to `18,380cr which was lower by 5% than our estimate. In line with the provisional figures provided the company; we had revised our 4QFY2011 top line estimate to `19,336cr. For FY2011, the total income grew by 26.6% yoy to `42,495cr (`33,573cr).
v Change in accounting policy: Starting 3QFY2011, the company had modified the method of calculating the percentage completion in order to remove the mismatch in recognition of revenue and the creation of provision for contractual obligation at 2.5% of the contract revenue on completion of trail operation and also to ensure that only 2.5% of the contract revenue is recognized on completion of trail operation with corresponding provision for contractual obligation. The above change/modification has resulted in increase of the annual turnover, contractual obligation and PBT by `2,7730cr, `2077cr and `695cr, respectively.
v Surge in EBIDTA margins: EBITDA margin for the quarter was impressive at 23.4%. (vs 20.7% Angel Estimate) On yoy basis, the margins expanded by around 276bps mainly aided by lower raw material costs. The strong top line growth coupled with the sharp margin expansion resulted in the EBITDA growing handsomely by 49.5% yoy to ` 4,294cr (`2,873cr).
v Reported PAT jumps 46.5% yoy: Led by strong growth and sharp margin expansion, PAT for the quarter grew by 46.5% to `2,798cr (`1,910cr) which was broadly in line with our quarterly estimate of `2,880cr (based on provisional figures provided for FY2011). For FY2011, the PAT posted a growth of 39.4% yoy to 6,011cr (`4,311cr).
At CMP of `1,945, the stock is trading at 13.7x and 12.3x its FY2012E and FY2013E earnings estimate. We are reviewing the exact nature and consequential impact of the modification in the accounting treatment undertaken during the current quarter. We would accordingly revise our estimates and release a detailed note shortly. Currently, we remain neutral on the stock.
Exhibit 1: Actual vs Estimates
| | Actual | Estimates | Var (%) |
| Revenue | 18,380 | 19,336 | (4.9) |
| EBITDA | 4,294 | 4,011 | 7.1 |
| PAT | 2,798 | 2,880 | (2.8) |
| EPS | 57.2 | 58.8 | (2.8) |
Exhibit 2: Quarterly performance (Standalone)
| (` cr) | 4QFY11 | 4QFY10 | % chg (yoy) | 3QFY11 | % chg (qoq) | FY11 | FY10 | % chg (yoy) |
| Net Sales | 17,921 | 13,559 | 32.2 | 8,849 | 102.5 | 41,579 | 32,880 | 26.5 |
| Other operating income | 459 | 386 | - | 174 | - | 916.65 | 692.51 | - |
| Total income | 18,380 | 13,945 | 31.8 | 9,023 | 103.7 | 42,495 | 33,573 | 26.6 |
| Stock adjustments | 667 | (25) | | (276) | | (127) | (787) | |
| Raw Material | 8,293 | 8,052 | 3.0 | 5,086 | 63.1 | 22,671 | 20,094 | 12.8 |
| (% of total income) | 48.7 | 57.6 | | 53.3 | | 53.0 | 57.5 | |
| Employee Cost | 1,460 | 1,743 | (16.3) | 1,349 | 8.2 | 5,410 | 5,243 | 3.2 |
| (% of total income) | 7.9 | 12.5 | | 14.9 | | 12.7 | 15.6 |
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