BHEL Q3 Results Review - Business Revival, Diversification On Cards: ICICI Securities

ICICI Securities Report

Bharat Heavy Electricals Ltd.’s Q3 FY23 revenue grew 2.5% YoY to Rs 52.6 billion, led by 7% YoY growth in power segment, which was offset by 21% YoY decline in industrial segment revenue.

Gross margin contracted 400 basis points YoY to 30%, but expanded 100 bps QoQ. Other expenses declined 97% YoY, which we believe was due to provision reversal. This led to Ebitda growth of 62% YoY to Rs 1.4 billion.

Industrial order intake was impressive at Rs 16 billion (up 142%), which ranged across supply of transformers, propulsion equipment, substations, gas compressors, among others.

Power order intake was Rs 16.5 billion, down 37%. Total order intake was flat at Rs 120 billion. BHEL's orderbook now stands at ~Rs 1.03 trillion (4.5 times trailing twelve months sales). We await revival in execution in industrial segment.

Factoring in lower execution in industrial segment and lower than expected other expense, we adjust our estimates accordingly. Nevertheless, we keep our FY25E earnings per share unchanged as execution of the recently-won orders will by then gather pace and boost profitability as well.

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