#BHEL - Should we invest or not?
🌟 Background on BHEL:
Bharat Heavy Electricals Limited is a state-run integrated power plant equipment manufacturer. The company has a footprint in over 86 countries catering its products and services to core sectors like Transportation, Renewable energy, defense, and Oil & Gas.
🌟 Revenue streams:
➡️ Power sector: ~70% of the revenues come from this sector (Manufacturing power plant equipment). BHEL accounts for ~53% of India’s total capacity of Utility power projects.
➡️ Industry Sector: ~30% of the revenues come from this sector (Products/Solutions to other sectors like Transportation, Renewables, Defence, etc.)
🌟 Market Performance over the years:
➡️ Stock price has been fairly stagnated if not declining the past 5 years.
➡️ Fluctuating revenues with few positive seasonal quarters.
➡️ Negative profit in 9 of the last 11 quarters.
➡️ Ever Increasing raw material costs leading to reduced operating margins.
🌟 Quarterly performance:
➡️ Operating Revenue increased by 1.8% YoY to Rs. 5,202 crores.
➡️ Operating Margin loss on the other hand widened to Rs 244 crores due to increased raw material costs.
➡️ Net income ended up positive (Rs. 12 crores) due to a rise in non-operating income.
🌟 What does management have to say about this?
In the post-earnings call, the management seemed confident as it is seeing an increase in order flow from the coal-based power plants segment. The company is also planning to capitalize on the upbeat in the railway segment by bidding for three train set tenders. Finally, as a part of its strategic plan, the company is working on cost-effectiveness and increasing market share in conventional segments.
