MUMBAI : Bharat Heavy Electricals Ltd (BHEL) shares have zoomed 77% so far in 2023. The government capex push has come as a shot in the arm for capital goods recently. But in BHEL’s case, a robust order inflow outlook mainly for its thermal power segment, is fueling optimism among investors. So much so that despite dismal earnings from the September quarter (Q2FY24), the stock is up 13% reacting to the results.
BHEL reported a net loss of ₹233 crore in Q2FY24 compared to a net profit of ₹10 crore in the same quarter last year. Higher raw material costs weighed on its operating efficiency. A tight working capital position and higher debt were the other key disappointments. Since the end of September, the working capital of BHEL ballooned to ₹4,382 crore from ₹1,210 crore at March end. Higher days owed (customers taking longer to pay) led to an extended working capital cycle, an ongoing concern for BHEL.
“Few power projects under construction ie 3x800MW NTPC Patratu are backdating (till the end of the project) payment terms which have been a source of working capital strain for the company,” JM Financial Institutional Securities Ltd said.
The pain of higher debt days will ease in FY25 onwards with the commissioning of a large number of projects that have better repayment terms, the JM report said.
But for now, the Street seems fixated on the state-owned company’s ordering prospects. Order flow for Q2 increased 49% year-on-year to ₹17,900 crore by taking the order book to ₹1.14 trillion until the end of September.
Facing a continuous increase in power demand in the country, ministry of power/Government of India has revised its thermal sorting plan to 53GW by FY30-31 from 24GW previously, said a Nuvama Research report. This implies 10-11GW of order every year and at least 5GW of order inflow for BHEL (50% market share) against the current assumption of 3GW, it added.
Moreover, the company’s ongoing efforts to diversify into non-thermal energy segments of railways, pumped-hydro-storage plants, and defence, are expected to keep BHEL’s order book in good stead.
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Updated: 19 Nov 2023, 21:07 IST