BHEL slips 18% on lower-than-expected March quarter results

In Q4FY21, EBITDA level loss came in at Rs 1,264.3 crore as against EBITDA loss of Rs 561.7 crore in Q4FY20

Shares of Bharat Heavy Electricals Limited (BHEL) slipped 18 per cent to Rs 62.55 on the BSE in intra-day trade on Monday after the company reported a lower-than-expected set of numbers for the quarter ended March 2021 (Q4FY21).

In Q4FY21, BHEL reported a net loss of Rs 1,036 crore as against a loss of Rs 1,532 crore in the year-ago quarter. Revenues grew 42 per cent year-on-year (YoY) at Rs 7,171 crore on a low base, with some impact of execution headwinds and pandemic. EBITDA (earnings before interest, taxes, depreciation, and amortisation) level loss came in at Rs 1,264.3 crore as against a loss of Rs 561.7 crore in Q4FY20 owing to lower-than-expected execution and higher-than-expected operating expenses.

“Overall, Q4FY21 appears to be muted as operating losses further widened despite some rebound in execution amid a low base. However, recent execution headwinds in power segment due to various issues leading to project delays and working capital stress continues to major near term challenges and needs to be resolved quickly to regain profitability amid pandemic,” ICICI Securities said in a note.

However, BHEL has initiated stringent measures on the cost control front to improve operational performance, working capital situation and focusing on new growth opportunities in oil and gas, transportation defence and aerospace for utilising manufacturing facilities and to achieve diversification, the brokerage firm added.

"BHEL continues to struggle with a weak ordering environment in the power sector, high receivables (around Rs 31,300 crore), and huge FY21 employee cost (around 31 per cent of sales). In FY21, working capital stood elevated 101 per cent of sales (99 per cent/63 per cent of sales FY20/FY19), weighed by a higher inventory and receivables and poor execution," Motilal Oswal Financial Services said in a result update.

The brokerage firm said it now estimates FY22E to be loss-making and reduce our FY23E EPS estimate by 36 per cent. "While orders are few and far between, the pricing environment remains highly competitive, limiting the scope for margin expansion. On its ongoing diversification strategy, the company has won its first order for Sulphur Recovery Unit (SRU) for Indian Oil Corporation Panipat and is restructuring its solar business division. Any material financial impact is still a long time away," it said.

At 10:36 am, BHEL was trading 10 per cent lower at Rs 68.30 on the BSE as against a 0.37 per cent decline in the S&P BSE Sensex. The trading volumes on the counter nearly doubled with a combined 115 million shares having changed hands on the NSE and BSE.