Fundamental Analysis-BHEL - Equity Research Report

Fundamental analysis-BHEL -Equity research report
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Home > BHEL
BHEL
About the Company
Stock Info
Bharat Heavy Electricals Limited (BHEL or the Company) is an integrated power plant
Current price BSE
255.75
Current price NSE
256.70
equipment manufacturer and one of the largest engineering and manufacturing companies in India in
terms of turnover.
62597.37
The Company manufactures a wide range of products and services for the core sectors of the
Market
Capitalisation
Rs.
Face value
Rs.
EPS (TTM)
27.03
Indian economy, including power, transmission, industry, transportation, renewable energy, oil & gas
and defence. The Company has been earning profits continuously since 1971-72 and paying
dividends since 1976-77. BHEL undertakes all jobs related to the construction, designing,
engineering and testing of its products all the way to commissioning and servicing. The Company
9.46
P/E
Engineering Heavy
Sector
currently operates at more than 150 project sites across India and abroad and has a wide
presence with 16 manufacturing divisions, 2 repair units, eight service centres, eight overseas
offices, 7 joint ventures and 15 regional centres.
2447600000
No of shares
BHEL accounts for 59% of the total installed capacity of around 1,80,000 MW in the utility sector
BSE 52 week high
291.50
BSE 52 week low
131.05
NSE 52 week high
291.50
NSE 52 week low
131.00
27865.83
BSE Sensex
across India as of 31 March 2012 and it accounted for approximately 69% of the total electricity
generated during the year 2011-12. BHELs global references are spread across 75 countries. The
cumulative overseas installed capacity of BHEL manufactured power plants exceeds 9,000 MW
across 21 countries including Malaysia, Oman, Iraq, the UAE, Bhutan, Egypt and New Zealand.
* The Equity Research Report presented below is based on a Fundamental Analysis of
BHEL.
Latest Shareholding Pattern
8322.20
Nifty
Average Volume
BSE
Average Volume
NSE
617917.00
5492232.00
500103
BSE Code
BHEL
NSE Symbol
Absolute returns
BHEL
SENSEX
1 Years
81.45%
31.66%
3 Years
-19.54%
57.39%
4 Years
-47.48%
39.10%
BHEL split its equity in the ratio of 1:5 on 3 October 2011. EPS and P/E numbers are adjusted to reflect the effect of split.
Key Financial Figures

Annually
(Rs. Cr)
Quarterly
Consolidated
Particulars
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
Total Income from Operations
27,144.04
33,870.66
42,787.28
48,355.22
48,915.84
Expenses
22,712.55
27,585.44
33,773.94
38,403.87
39,433.24
4,431.49
6,285.22
9,013.34
9,951.35
9,482.60
Earnings Before Other Income,

Interest, Tax and Depreciation
(Operating Profit)
Depreciation
343.07
460.26
546.37
803.24
957.18
Finance Costs
35.18
36.69
48.63
53.07
127.61
Other income
784.71
832.62
647.34
1,272.03
1,128.76
(0.16)
(4.14)
Exceptional items
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PBT
4,837.95
6,620.89
9,065.68
10,367.23
9,530.71
Tax
1,722.78
2,293.97
3,012.32
3,279.97
2,837.61
3,115.17
4,326.92
6,053.36
7,087.26
6,693.10
(0.18)
(0.27)
3,115.17
4,326.92
6,053.36
7,087.44
6,693.37
PAT (before Minority Interest and share

of Associates)
Profit/ (loss) attributable to Minority
Interest
Share of profit / (loss) of Associates
Consolidated Profit / (Loss) for the
year
Standalone
Particulars
FY 2012 Q4
FY 2013 Q1
FY 2013 Q2
FY 2013 Q3
FY 2013 Q4
19,588.94
8,439.01
10,561.55
10,219.71
19,204.38
Expenses
14,651.72
7,236.82
8,662.08
8,585.65
14,553.16
4,937.22
1,202.19
1,899.47
1,634.06
4,651.22
254.14
228.39
216.31
219.79
288.90
Earnings Before Other Income,

Interest, Tax and Depreciation
(Operating Profit)
Depreciation
Finance Costs
18.34
5.52
25.86
50.91
40.53
Other income
398.91
366.27
130.67
332.38
292.39
PBT
5,063.65
1,334.55
1,787.97
1,695.74
4,614.18
Tax
1,683.84
413.65
513.52
513.89
1,376.64
3,379.81
920.9
1,274.45
1,181.85
3,237.54
PAT (before Minority Interest and

share of Associates)
Profitability Analysis
Annually
(%)
Quarterly
Consolidated
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
Operating Profit Margin Ratio
Particulars
16.33
18.56
21.07
20.58
19.39
Net Profit Margin Ratio
11.48
12.77
14.15
14.66
13.68
Standalone
FY 2012 Q4
FY 2013 Q1
FY 2013 Q2
FY 2013 Q3
FY 2013 Q4
Operating Profit Margin Ratio
Particulars
25.20
14.25
17.98
15.99
24.22
Net Profit Margin Ratio
17.25
10.91
12.07
11.56
16.86
Operating profit margin is a measurement of the proportion of a companys revenue that is left over after paying for production costs such as raw materials, salaries and
administrative costs. Net profit margin is arrived at by deducting non operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what
is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analysing business
inefficiencies.
Profitability Ratios
Key Balance Sheet Figures
(Rs. Cr)
Sources of Funds / Liabilities

Particulars
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
Share Capital
489.52
489.52
489.52
489.52
489.52
Reserves & Surplus
12,429.06
15,406.46
19,665.49
24,913.54
30,043.21
Net worth (shareholders funds)
12,918.58
15,895.98
20,155.01
25,403.06
30,532.73
4.97
4.70
Share application money pending allotment
Minority Interest
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Long term borrowings

Current liabilities
Other long term liabilities and provisions
Total Liabilities
166.56
148.30
102.40
282.07
2,623.57
28,568.74
32,656.09
25,257.47
29,155.38
29,591.12
14,102.91
12,584.8
9,000.58
41,653.88
48,700.37
59,617.79
67,430.28
71,752.70
(Rs. Cr)
Application of Funds / Assets

Particulars
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
Fixed Assets
2,821.78
4,143.05
5,366.34
6,282.06
7,035.92
5.94
5.94
11.30
5.94
5.94
36,985.16
43,022.76
43,588.45
49,090.37
49,084.37
8,486.53
10,502.43
15,626.47
1,841.00
1,528.62
2,165.17
1,549.48
41,653.88
48,700.37
59,617.79
67,430.28
71,752.70
Noncurrent Investments
Current assets
Long term advances and other noncurrent
assets
Deferred Tax Assets
Total assets
Efficiency Analysis
Particulars
(%)
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
ROCE
33.87
39.17
44.49
38.74
29.11
ROE / RONW
24.11
27.22
30.03
27.90
21.92
Return on Capital Employed (ROCE) measures a companys profitability from its overall operations by calculating the return generated on the total capital invested in the
business (i.e. equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount of profit which the company generates on money invested by the
equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in
comparing the profitability of the company with other companies in the same industry.
Efficiency Ratios
Valuation Analysis
Annually
Quarterly
Consolidated
Particulars
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
Total Income from Operations (Rs. Cr.)
33,870.66
42,787.28
48,355.22
48,915.84
39,569.41
Growth (%)
24.78 %
26.33 %
13.01 %
1.16 %
(19.11 %)
PAT (Rs. Cr.)
4,326.92
6,053.36
7,087.26
6,693.10
3,502.86
Growth (%)
38.90 %
39.90 %
17.08 %
(5.56 %)
(47.66 %)
Earnings Per Share Basic (Rs. )
17.68
24.73
28.96
27.35
14.31
Earning Per Share - Diluted (Rs. )
17.68
24.73
28.96
27.35
14.31
Price to Earnings
26.98
16.67
8.87
6.47
17.38
FY 2013 Q1
FY 2013 Q2
FY 2013 Q3
FY 2013 Q4
19,204.38
Standalone
Particulars
FY 2012 Q4
19,588.94
8,439.01
10,561.55
10,219.71
Growth (%)
82.34 %
(56.92 %)
25.15 %
(3.24 %)
87.92 %
PAT
3,379.81
920.9
1,274.45
1,181.85
3,237.54
Growth (%)
135.92 %
(72.75 %)
38.39 %
(7.27 %)
173.94 %
Earnings Per Share Basic
13.81*
3.76*
5.21*
4.83*
13.23*
Earning Per Share - Diluted
13.81*
3.76*
5.21*
4.83*
13.23*
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Price to Earnings
* Not annualised
Price Earnings Ratio
Dividend History
Rate of dividend (of face value)
Rs.
Closing price*
Date*
FY 2008
152.5 %
3.05
344.38
01 September 2008
FY 2009
170 %
3.40
452.24
01 September 2009
FY 2010
233 %
4.66
484.62
01 September 2010
FY 2011
311.5 %
6.23
500.21
10 August 2011
FY 2012
320 %
6.40
201.35
06 September 2012
FY 2013
271 %
5.42
141.55
06 September 2013
FY 2014
142 %
2.83
223.90
08 September 2014
Year
* Closing Price as on the date of declaration of final (or last) dividend for the Financial Year.
The Company has maintained an average dividend yield of 1.40 % over the last 5 financial years.
Liquidity and Credit Analysis

Current Ratio
Higher current ratio implies healthier short term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short
run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies squeeze out short term cash sources to achieve a capital
intensive plan with a longer term outlook. BHELs average current ratio over the last 5 financial years has been 1.50 times which indicates that that the Company is comfortably
placed to pay for its short term obligations.
Long Term Debt to Equity Ratio
Companies operating with high debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt
find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 - 0.8 could affect
the business of a company and its results of operations.
BHELs average long term debt to equity ratio over the last 5 financial years has been 0.008 times which indicates that the Company operates with a low level of debt and is
well placed to pay for its obligations.
Interest Coverage ratio
Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest
coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise
doubts about the companys ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service
its debt obligations.
BHELs average interest coverage ratio over the last 5 financial years has been 167.53 times which indicates that the Company has been generating enough for the
shareholders after servicing its debt obligations.
Liquidity & Credit Ratios
Ownership pattern
Shareholding
(%)
March 2010
March 2011
March 2012
March 2013
March 2014
Promoter
67.72
67.72
67.72
67.72
63.06
FIIs
15.21
12.90
13.48
14.75
16.14
DIIs
11.05
12.72
12.85
12.42
16.47
6.02
6.66
5.95
5.11
4.33
Others
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In its latest stock exchange filing dated 31 March 2014, BHEL reported a promoter holding of 63.06 %. Large promoter holding indicates conviction and sincerity of the
promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors.
At the same time, institutional holding in the Company stood at 32.61 % (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it
can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.
Final Score Based on Fundamental Analysis of BHEL
Is this the right time to buy / sell BHEL ?
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Latest Shareholding Pattern

Key Financial Figures

Total Income from Operations

Earnings Before Other Income,