Bharat Heavy Electricals (500103) Q4 96/97 earnings summary

Executive summary

• FY97 turnover reached Rs. 57,553m, up 19.1% YoY; PBT rose 48.5% to Rs. 8,644m and PAT rose 32.3% to Rs. 4,632m.

• Record order inflows of Rs. 71,880m supported a year-end order book above Rs. 106,000m; FY98 began with strong project visibility.

• Results advanced despite fierce competition and slower domestic industrial growth; the annual MOU targets were achieved, earning an “Excellent” rating for the eighth consecutive year.

Financial highlights

• Value added increased 16.8% to Rs. 25,346m; operating profit was Rs. 11,315m versus Rs. 7,920m in FY96.

• EPS rose to Rs. 18.92 from Rs. 14.30; net worth per share increased to Rs. 78.60 from Rs. 60.80.

• Export turnover, including deemed exports, reached Rs. 12,941m, up 54% YoY; new products contributed Rs. 15,600m, or 27.1% of turnover.

• A Rs. 475.4m provision covered the full expected impact of the proposed gratuity ceiling increase; gross margin relative to value of production still rose to 20.9% from 16.8%.

Outlook and guidance

• FY98 growth was expected to continue, supported by the record opening order book and potential recovery in power and industrial project activity.

• Lower interest rates and improved liquidity were expected to revive deferred private-sector projects; power-sector prospects depended on resolving constraints on new capacity installation.

• Customer-focused initiatives targeted shorter cycle times, productivity, cost control, advance procurement and process re-engineering; customer arrears remained a concern.