Bharat Heavy Electricals (500103) Q4 97/98 earnings summary

Executive summary

• FY1997-98 turnover rose 12.4% to Rs.64,713 million; PBT increased 18.2% to Rs.10,217 million and PAT rose 55.3% to Rs.7,195 million.

• Order inflow was Rs.58,530 million, with an outstanding order book exceeding Rs.100,000 million for execution in 1998-99 and beyond.

• Overall MOU targets were achieved, earning an “Excellent” rating for the ninth consecutive year.

Financial highlights

• Operating profit was Rs.12,055 million versus Rs.11,315 million; value added increased 13.9% to Rs.28,867 million.

• Export turnover, including deemed exports, reached Rs.17,840 million, up 37.9% YoY and 27.6% of turnover; new products contributed Rs.18,670 million, or 28.9%.

• PAT of Rs.7,195 million included a net Rs.814.8 million interest income related to prior income-tax assessments and related charges.

• Gross margin as a share of value of production eased to 20.2% from 20.9%, mainly due to wage-revision provisions; internal resource generation rose 45.9% to Rs.7,944 million.

• Board recommended a 25% dividend, up 5 percentage points YoY; retained earnings were Rs.6,522 million.

Outlook and guidance

• More than Rs.100,000 million of orders were available for execution in FY1998-99 and beyond; the reported 35% increase in infrastructure outlay for 1998-99 was viewed as a potential industrial-growth catalyst.

• Power-sector prospects were viewed optimistically, supported by electricity demand and planned capacity additions; strategy included consortium bids, selective equity participation and limited financing packages for private projects.

• Priorities included export-market expansion, project-management improvements, shorter delivery cycles, cost reduction, spares and services growth, and manufacturing modernisation.

• IGCC, 5 MVA superconducting generators and 50 kW fuel cells were under development, with completion expected during 1998-99.