BHEL:Q316 operational performance significantly below estimates.

11 February 2016

Q3FY16 Results Update | Sector: Capital Goods

BHEL

Neutral

BSE SENSEX

22,952

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm/ Vol m

Free float (%)

S&P CNX

6,976

BHEL IN

2,447.6

294.6 / 4.3

290/119

-12/-36/-33

927.5 / 4.1

36.9

CMP: INR128



TP: INR140 (+17%)

Financials & Valuations (INR b)

Y/E Mar

2016E 2017E 2018E

Net Sales

269.4 320.4 356.2

EBITDA

-10.7

20.9

25.5



PAT

-4.3

17.6

18.5

EPS (INR)

-1.8

7.2

7.5

EPS Gr. (%)

-130.2 -508.6

4.9

BV/Sh. INR

137.9 143.5 149.3

RoE (%)

-1.3

5.1

5.2



RoCE (%)

-1.2

5.0

5.1

P/E (x)

-68.1

16.7

15.9

P/BV (x)

0.9

0.8

Estimate change

TP change

Rating change



Q316 operational performance significantly below estimates.

Sales at

INR52.3b (down 14.1% YoY) and below our estimates of INR57b with Power

segment sales declining 9% YoY and industrial segment down 23% YoY. Adj.

EBIDTA loss of INR4.5b (excluding provision for customer dues and inventory

write off of INR12b) was meaningfully below our estimates of a profit of

INR106m. Adj. EBIDTA margins at negative 8.5% (significantly lower than

estimates of 0.2%) were impacted by a significant drop in gross margins (-11%

YoY) and lower sales. Adj. PAT of INR0.85b post a tax write back of INR6.0b vs.

our estimate of PAT at INR0.51b. Reported PAT at –INR11b.

Gross margins at 35.2% (-11% YoY, +100bps QoQ) remain at depressed levels.

The steep fall in gross margins driven by three factors: a) higher share of super

critical equipment where most customers insist for a Joint Deed of Undertaking

(JDU), b) Lower realization as a result of intense competition, c) EPC orders at

23% of the sales vs. 17% in Q315 which have lower margins.

L1 in 10.3GW of orders; slow moving orders at INR330b.

BHEL is L1 in 10.3GW

of orders. Including the recently announced orders in Q416, BHEL has already

bagged orders worth INR343b till date and management expects another

INR80b to be booked in Q416 which would imply FY16 orders at

~INR420b(+36% YoY). Order book at INR1.09trn of which 32% is slow moving.

Valuations and view; cutting estimates and target price.

To factor in the miss

in Q316 results, the constrained execution (32% of order book is slow moving

and expectations of continued margin pressure, we cut our FY17/FY18 earnings

estimates by 31%/ 28% respectively. We maintain our Neutral rating with a

target price of INR140/share (P/E of 18x FY18E).

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Ankur Sharma

(Ankur.VSharma@MotilalOswal.com); +91 22 3982 5449

Amit Shah

(Amit.Shah@MotilalOswal.com); +91 22 3029 5126

BHEL

3QFY16 results significantly below estimates; provision of INR12b for

customer dues and inventory write off during the quarter



BHEL reported weak 3QFY16 operational performance with revenues at

INR52.3b (down 14.1% YoY) and below our estimates of INR57b. Adjusted

EBIDTA a loss of INR4.5b (excluding provision for customer dues and inventory

for the projects on hold of INR12b) was meaningfully below our estimates of a

profit of INR106m. Adjusted EBIDTA margins at negative 8.5% (significantly

lower than estimates of 0.2%); impacted by significant drop in gross margins (-

11% YoY) and lower sales. Adjusted PAT of INR0.85b helped by a tax write back

of INR6.0b vs. our estimate of PAT at INR0.51b. Reported EBIDTA for the quarter

stood at negative INR16.4b and reported PAT stood at negative INR11.1b

Gross margins fell 11% YoY to 35.2% impacted by execution of low margin super

critical orders executed under JDU route(43% of total power segment sales),

pricing pressures as a results of intense competition in a weak environment and

higher proportion of EPC sales (23% vs. 17% YoY).

Gross margins for BHEL have been under pressure over the past two quarters as

it executes an increasingly higher proportion of super critical orders under the

JDU route. Under the JDU route, the technology collaborators guarantee the

performance for the equipment along with BHEL; however, this also implies that

BHEL has to source components from these suppliers and since these have a

high imported content, this has led to weaker margins for BHEL. Since most

central and state utilities demand a JDU for super critical equipment, the

pressure on margins may not be a one off event, in our view. We do note that

BHEL has completely indigenized manufacturing of SC boilers/TG – the JDU

clause can be removed in case of an operational SC power plant for two years

and BHEL has commissioned 800MW SC boilers for AP Genco,

Krishnapatnam(FY14), NTPC Barh 2(2*660MW, FY14) and Bajaj

Lalitpur(3*660MW, FY16). It intends to work with the Ministry of Power and

NTPC to remove the JDU clause in the future orders. ~40% of BHEL’s current

order book is composed of super critical orders (most with a JDU clause in our

view) and these orders are likely to see margin pressures during execution. The

share of super critical orders is likely to increase further (65% as per

management) as CEA has stopped issuing clearances for sub critical projects.

Another reason for the fall in margins during the quarter is due to pricing

pressure as a result of BHEL’s aggressive stance to take market share. While

BHEL has been able to sustain market share at 70-75% over the last few years,

this may have come at the cost of margins. Industry orders during FY12-15 had

fallen to ~6-8GW with only FY13 seeing ~15GW of orders due to NTPC bulk

tenders and this coincided with a sharp increase in the no. of private players

setting up BTG manufacturing capability in India. This lead to a sharp fall in

prices for BTG/EPC equipment by ~15-20% over the same period. Even though

industry orders in FY16 are expected to bounce back to ~15-18GW, there has

not been any material improvement in pricing given that the industry capacity

continues to be ~25GW.

Staff cost

at INR14.4b in 3QFY16 (up 6% YoY) rose primarily because of higher

dearness allowance pay to employee. The management has stated that the

retirements will be 2,200+ employees in FY16 (vs. 2,657 in FY15); overall, staff

costs are guided to be lower than the INR55b in FY15.

11 February 2016

BHEL



Other expenses

at INR20.8b is up 71% YoY, primarily on higher provisioning for

dues worth INR10.9b and INR1b provisioning towards WIP/FG inventory for

projects on hold.

Exhibit 2: Gross margin impacted led by execution of SC

orders under JDU route and pricing pressure (%)

Gross Margin

Exhibit 1: Revenues down 14% YoY on a declining order

book and execution constraints

Revenues(INR b)

Revenue growth (% YoY)

Source: MOSL, Company

Segmental performance: Execution remains constrained on slow moving/

stranded projects which now stand at INR32.6b



3QFY16 Power segment revenues at INR44.01b were down 9% YoY, while

industry segment revenues were down 23% YoY at INR11.4b. Power sector

revenues have been impacted given weak execution due to lack of regulatory

clearances, local issues, delays in payment / LCs, uncertainty surrounding coal

block de-allocations, etc. The management stated that execution continues to

remain sluggish, with stranded projects at ~INR32.6b, ~35%

of BHEL’s power

segment order book.

A resolution of the stranded orders is unlikely to happen

any time soon and a restart of execution on these orders is still a couple of

quarters away.

BHEL had won three large orders from Telengana State Genco in Q415/Q116 at

Manuguru(4*270MW,

INR50b),

Kothagudem(800MW,

INR38b)

and

Yadadri(5*800MW, INR180b). Execution on Kothagudem has started with all

clearances already in place. For Manuguru, the EC is still awaited but BHEL has

begun execution at the behest of the state government. However, for Yadadri

since the advance payment has not been received, work is yet to commence.

The advance payment is likely to come through only post the project is given EC

and this may take some more quarters. A material pick up in execution from the

Telengana projects is likely to start only in FY17.

The Industry business has failed to provide support, given the dependence on

captive power (50%+ of revenues); also the traction in transportation segment

has been much below expectations given the delayed decision making in

Railways. Margins have been impacted given the increased revenue contribution

from projects.

11 February 2016

BHEL

Exhibit 3: Segmental breakup

INR m

Revenues

Power

Growth (%)

Industry

Growth (%)

EBIT

Power

Growth (%)

Industry

Growth (%)

EBIT margin (%)

Power

Industry

52,772

41,442

(23.0)

11,331

(12.3)

5,645

5,250

(30.8)

395

(69.9)

10.7

12.7

3.5

FY15

63,193

47,370

(37.5)

15,824

(9.0)

6,955

6,661

(39.4)

295

(798.6)

11.0

14.1

1.9

63,555

48,624

(33.6)

14,931

(6.7)

4,651

4,587

(62.0)

(97.2)

7.3

9.4

0.4

129,951

102,401

(16.1)

27,550

(14.5)

15,782

13,119

(43.8)

2,664

(57.5)

12.1

12.8

9.7

44,953

33,517

(19.1)

11,436

0.9

2,191

2,162

(58.8)

(92.6)

4.9

6.5

0.3

FY16

61,933

48,543

2.5

13,390

(15.4)

-713

-279

(104.2)

-434

(247.3)

-1.2

-0.6

55,529

44,021

(9.5)

11,508

(22.9)

-12,628

-11,656

-972

-22.7

-26.5

-3.2

-8.4

Source: Company, MOSL

Exhibit 4: Stranded and slow moving orders in the order book

Name of Power Project

Surana Power, Raichur TPP

Malibrahmani, Angul TPP

Singraulli

Inddibulls Nashik Phase II

Ramgarh CPP

Usha Jayaswal TPP

Raghunathpur

Ennore SEZ

Yedadri Thermal Power Project **

Chattisgarh

Total

Customer

Surana Power

Monnet Ispat

DB Power

Rattan India (Phase II)

RRVUNL

Abhijeet Infra Phase 1

DVC

TANGEDCO Ennore

Telanagana State Genco

Visa Power

420

1,050

1,320

1,350

1,320

1,080

1,320

4,000

1,200

13,180

Source: MOSL, Company **the project is yet to reach the start date since no advances have been

received

Order intake at INR57.8b in 3QFY16 (vs INR66.4b in 3QFY15), L1 pipeline

robust at 10.3GW+



During 3QFY16, BHEL’s order intake stands at INR57.8b vs INR66.4b in 3QFY15.

Post 3QFY16, BHEL has received orders worth INR35b of 1.6GW STG order for

Telangana super thermal power project (2x800MW).

Order backlog at the end of 3QFY16

stood at INR1092b, up 5% YoY. INR51b of

orders in the Power sector

were booked whereas Industry segment order

intake stood at INR9.6b (Solar plant EPC, Transformers, CPP-STGs, etc).

BHEL is L1 in 10.GW+ projects, comprising of i) NTPC Barethi (BTG+Aux), ii)

500MW Tuticorin (BTG, INR12b) iii) 1GW of Pakal DUL Hydro power with Patel

Engg (~INR90b JV share, BHEL likely at INR10b) iv) 660MW Mahagenco

Bhusawal (EPC) v) Sole bidder for 250MW Rourkela CPP, vi)2x660MW Upur

power project in Tamil Nadu vii)NTPC Pudimadka TG(4000MW) viii) 1320MW

Maitri power plant in Bangladesh. This compares with project awards of 5.3GW

to BHEL in FY15 / 4GW in 1QFY16, and thus the pipeline looks encouraging.

11 February 2016

BHEL



Management expects order inflow of INR80b over the next 45 days and INR420b

in FY16.

BHEL’s order intake had declined from peak levels of ~INR600b in FY10/FY11 to

average levels of INR280b in FY12-15 BTG pipeline is showing signs of a strong

recovery in FY16 with projects of ~15-20GW likely to be awarded in FY16. This is

meaningfully higher than project awards of 6.3GW in FY14 / ~7-8GW in FY15.

However, we see a limited pipeline of 18GW of orders going into FY17-18 unless

orders for UMPP’s start coming through.

Exhibit 6: BTB has witnessed a cyclical uptick to 3.8x in

3QFY16

Order book (INR b)

Book-to-bill ratio ( x TTM)

Exhibit 5: Order

intake

has been muted in 3Q, led by delay

in finalization of orders

Order intake (INR b)

Source: Company

Exhibit 7: Potential Pipeline of ~17GW to be awarded over next 2-3 years, largely from the

Central / State sector (excludes orders where BHEL is already L1)

Project

Udangudi

Katwa

Ramagundem

Lakhisarai

Ghatampur

Pirpainty

Gorakhpur

Chandrapur

Koradi

Latur

Panipat Thermal (Unit 9)

Orba Extension

Potential Pipeline

Owner

TN Genco

NTPC

Bihar (26%) - NTPC (74%)

Neyveli

Bihar (26%) – NHPC (74%)

Nuclear Power

Mahagenco

Haryana

UPRUVNL

Sector

State

Central

State

Cap (MW)

1,320

1,600

1,320

1,980

1,320

1,400

1,320

1,980

1,320

660/800

600

~16,680

Comments

Nuclear

Source: MOSL, Company

BTB inches to 3.8x in 3QFY16 (vs lows of 2.2x in Sept 13): a key trend driving

cyclical factors



For 3QFY16, BHEL’s BTB stood at 3.8x (from lows of 2.2x in Sept 13). Also, Power

segment BTB is expected to bounce back to 4.3x in FY16.

We believe that improvement in BTB is an all-important trend for capital goods

companies, and has ramifications on several cyclical components including

working capital, operating free cash flows and operating leverage.

11 February 2016

BHEL

Exhibit 8: BHEL has expanded power sector offerings meaningfully over past three years

Year

FY14

FY13

FY12

Increased Offerings, Technology Licensing’s, etc

Commissioned Critical piping / Heavy Boiler parts factory at Trichy

Super critical boiler which can switch 100% indigenous / imported coal

Expand offerings in nuclear for BOP, Control centre instrumentation etc

Marketing of Coal Handling & Ash Handling Plants as independent systems

Enterprise Framework Agreement with Shell for Gas Turbine Generator

Technology Licensing with Mitsubishi Heavy Inds, Japan for Flue Gas Desulphurization

Introduced new ratings 300MW sets

Technology Licensing with GE India Industrial for Water Management System

Stabilization of CFBC boiler technology (250MW /125MW boilers)

Developing Power plant EPC capabilities

Source: MOSL, Company

BHEL is expanding the

power sector portfolio by

adding Flue-Gas

Desulphurization, Water

Management System, Air

Cooled Condenser and

other Balance of Plant

Systems

New initiatives/expansion plans: Solar / Defence / Railways opens up

interesting possibilities



MoU with Solar Energy Corporation, PGCIL, SJVNL, Sambhar Salts and Rajasthan

Electronics for setting up a 4GW Ultra Mega Solar Power Project at Sambhar,

Rajasthan. Also, BHEL has plans to set up an integrated manufacturing facility for

480MW Solar PV systems (Wafers-Cells-Modules) at a capex of INR24b (of which

40% will be funded through capex subsidy). BHEL intends to be an integrated

player in the solar equipment value chain, including inverters / substations, etc.

The management believes that the Cabinet approval for capital subsidy payment

is expected shortly. In solar, BHEL has also received orders for 51MW of EPC

projects from NTPC (~INR3.5b) and the targeted execution in FY16 is 100MW.

In Dec 2014, BHEL, Hindustan Shipyards and Mishra Dhatu Nigam came together

to form a consortium to bid for the construction of six Scorpene submarines.

Separately, the company is also bidding for the naval gun systems, and the order

could be finalized in FY16.

BHEL is also bidding for the railway tender to set up manufacturing facilities for

electric and diesel locos, in tie-ups with MNC players. The company has also tied

up with Kawasaki and Toshiba for bidding for 15 train sets, of which 13 will be

manufactured in India (under Make in India initiative).

11 February 2016

BHEL

Valuations and view

To factor in the sharp decline in margins in Q316, continued execution challenges

from slow moving order which now stands at ~35% of power order book and limited

visibility on orders in FY17/18, we cut our FY17/18 estimates by 31/38% and expect

BHEL to report EPS of negative INR1.8 in FY16E, INR7.2 in FY17E and INR7.5 in FY18.

At the CMP of INR128/sh, the stock quotes at PER of 17x FY17E/ 16x FY18E. We

maintain our rating to Neutral with a target price of INR140/sh (PER of 18x FY18E).

Key Triggers



Sharp pick up in projects awards in FY17/FY18 from the public and private sector

utilities. However, this appears to be highly unlikely given the poor balance

sheet strength of most IPP’s.

Successful coal mine auctions, sustained ramp up in Coal India production.

Lower than expected increase in salaries as a result of the Pay Commission

recommendations.

Key risks/variables



The key variable to watch out is the impact of Pay Commission’s implementation

in FY17 and could be a vital swing factor. BHEL is trying to mitigate part of the

impact by productivity improvements /operating leverage over the medium

term.

Another variable is the uncertainty on coal block de-allocations and mine

auctions, which could delay the order pipeline and impact execution in the

interim period.

Exhibit 9:

Change in estimates

Description

Sales

EBITDA

margin(%)

PAT

EPS

New Estimates

FY16E

FY17E

262,362

313,272

-10,716

20,863

-4.1%

6.7%

-4,312

17,616

-1.8

7.2

FY18

348,999

25,462

7.3%

18,473

7.5

Old Estimates

FY16E

FY17E

280,306

328,000

22,589

38,497

8.1%

11.7%

22,016

26,000

9.0

10.5

FY18E

363,000

36,300

10.0%

26,000

10.5

YoY Change(%)

FY16E

FY17E

-6%

-4%

-46%

-12%

-5%

-32%

-31%

FY18E

-4%

-30%

-3%

-29%

-28%

Source: MOSL

11 February 2016

BHEL

BHEL: Operating metrics

FY06

Order Intake (INR b)

Power

R&M

Industry

International Business

Cancellations

Total Order Intake

% YoY

Segmental Revenues

Power (incl. international business)

Industry

Total Revenues

EBITDA Margins (%)

Contribution Margins (%)

Staff Costs (%)

Other Expenses (%)

Employees (in 000)

INR M/empl

Cash / (Debt), INR B

Cash

Retention Money

Debt

Net Cash / (Debt)

INR/sh

Net Profit (INR B)

EPS (INR / sh)

ROE (%)

189

FY07

245

356

88%

FY08

387

503

41%

FY09

444

597

19%

FY10

401

135

590

-1%

FY11

443

114

605

FY12

176

221

-63%

FY13

226

319

45%

FY14

175

285

-11%

FY15 FY16E FY17E FY18E

211

308

347

441

43%

342

451

359

485

145

18.9

43.3

13.7

10.7

42.6

0.0

127

187

20.4

43.3

13.9

9.0

42.6

0.0

159

214

18.9

44.4

15.8

9.7

42.1

0.0

213

280

15.7

38.5

15.4

7.4

43.6

0.0

269

342

17.7

40.4

15.7

6.9

46.3

0.0

348

450

19.9

40.3

13.5

9.5

46.7

0.0

379

102

495

20.3

41.5

11.4

9.4

49.4

1.1

396

106

502

19.4

43.5

5.2

12.2

48.4

1.2

325

403

11.6

42.4

3.1

15.7

47.5

1.2

240

309

7.0

43.9

(8.2)

18.9

44.9

1.2

226

275

(4.0)

38.0

(1.3)

19.2

42.2

1.3

278

328

6.5

39.0

0.7

13.3

40.1

1.4

307

366

7.1

40.5

20.8

12.7

42.1

1.6

-6

6.9

23.0

-1

9.9

27.5

-1

111

10.3

23.3

103

-1

144

14.6

27.6

-1

164

19.2

29.4

-1

192

23.2

28.1

135

-1

200

28.2

27.2

129

-14

192

27.0

23.7

119

181

-27

273

112

14.2

10.9

202

-1

300

122

5.8

4.3

141

182

-1

322

131

-4

-1.8

-1.3

106

164

-1

269

110

7.2

5.1

131

147

-1

278

113

7.5

5.2

11 February 2016

BHEL

Financials and Valuations

Income Statement

Y/E Mar

Net Sales

Change (%)

EBITDA

EBITDA Margin (%)

Depreciation

EBIT

Interest

Other Income

Extraordinary items

PBT

Tax

Tax Rate (%)

Min. Int. & Assoc. Share

Reported PAT

Adjusted PAT

Change (%)

2011

404,443

21.3

80,532

19.9

5,441

75,091

547

10,206

5,305

90,055

29,945

33.3

60,110

56,650

20.9

2011

4,895

196,643

201,538

1,021

-21,636

180,924

80,497

46,488

34,009

17,338

4,392

515,229

108,521

274,656

96,302

35,751

390,043

305,315

84,728

125,186

180,924

2012

479,788

18.6

99,076

20.6

8,000

91,076

513

12,656

-193

103,026

32,623

31.7

70,403

68,922

21.7

2012

4,895

248,837

253,732

1,234

-15,462

239,504

97,066

54,098

42,968

13,476

4,617

591,237

135,487

357,405

66,720

31,624

412,794

327,373

85,421

178,443

239,504

2013

484,247

0.9

93,905

19.4

9,534

84,371

1,253

11,217

-4

94,331

28,184

29.9

66,147

66,152

-4.0

2013

4,895

299,546

304,441

14,152

-15,507

303,086

108,247

63,281

44,966

11,335

4,292

625,185

117,638

398,882

77,321

31,344

382,692

293,270

89,421

242,494

303,086

2014

391,089

-19.2

45,200

11.6

9,829

35,371

1,326

16,160

-61

50,144

15,535

31.0

34,608

34,669

-47.6

2014

4,895

325,575

330,471

26,548

-19,690

337,329

120,734

73,604

47,131

6,220

4,202

650,670

97,976

399,530

118,729

34,435

370,893

267,633

103,260

279,777

337,329

2015

301,830

-22.8

20,992

7.0

10,773

10,219

917

12,205

-101

21,406

7,210

33.7

14,196

14,297

-58.8

2015

4,895

335,951

340,846

610

-22,207

319,249

125,910

84,510

41,400

5,010

4,350

611,704

101,017

376,373

98,127

36,187

343,215

232,811

110,404

268,489

319,249

2016E

269,381

-10.8

-10,716

-4.0

9,745

-20,461

200

13,475

-7,186

-2,875

40.0

-4,312

-130.2

2016E

4,895

332,623

337,518

610

-22,207

315,921

133,991

94,255

39,737

5,010

4,400

563,366

90,157

321,150

140,617

11,443

296,591

198,056

98,535

266,775

315,921

2017E

320,401

18.9

20,863

6.5

10,408

10,455

200

14,911

25,166

7,550

30.0

17,616

-508.6

2017E

4,895

346,220

351,115

610

-22,207

329,518

143,603

104,663

38,940

5,010

4,450

590,377

107,232

364,419

105,850

12,877

309,260

192,062

117,198

281,118

329,518

(INR Million)

2018E

356,249

11.2

25,462

7.1

11,170

14,292

200

12,298

26,391

7,917

30.0

18,473

4.9

Balance Sheet

Y/E Mar

Share Capital

Reserves

Net Worth

Debt

Deferred Tax

Total Capital Employed

Gross Fixed Assets

Less: Acc Depreciation

Net Fixed Assets

Capital WIP

Investments

Current Assets

Inventory

Debtors

Cash & Bank

Loans & Adv, Others

Curr Liabs & Provns

Curr. Liabilities

Provisions

Net Current Assets

Total Assets

(INR Million)

2018E

4,895

360,478

365,373

610

-22,207

343,776

154,291

115,833

38,458

5,010

4,500

649,689

119,230

385,671

130,903

13,885

353,881

223,571

130,310

295,808

343,776

11 February 2016

BHEL

Financials and Valuations

Ratios

Y/E Mar

Basic (INR)

EPS

Cash EPS

Book Value

DPS

Payout (incl. Div. Tax.)

Valuation(x)

P/E

Cash P/E

Price / Book Value

EV/Sales

EV/EBITDA

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

Turnover Ratios (%)

Asset Turnover (x)

Debtors (No. of Days)

Inventory (No. of Days)

Creditors (No. of Days)

Leverage Ratios (%)

Net Debt/Equity (x)

2011

23.1

25.4

82.3

6.2

25.4

0.0

28.1

47.1

7.7

241

100

-0.5

2011

80,532

10,206

-36,596

-29,945

17,306

41,503

-17,339

24,165

-3,593

-20,932

-6,369

-256

-547

-14,999

-22,171

-1,599

97,901

96,301

2012

28.2

31.4

103.7

6.4

22.3

11.5

10.3

3.1

1.5

7.3

3.0

27.2

43.3

8.4

263

105

-0.3

2012

99,076

12,656

-78,991

-32,623

-4,898

-4,780

-13,097

-17,878

-225

-13,322

6,169

213

-513

-17,960

-12,091

-30,194

96,914

66,720

2013

27.0

30.9

124.4

5.4

20.0

4.4

6.6

1.0

0.6

2.5

4.5

23.7

21.0

8.6

301

-0.2

2013

93,905

11,213

-53,449

-28,228

23,440

-9,390

14,050

325

-9,065

12,918

-1,253

-15,466

-3,773

10,601

66,720

77,321

2014

14.2

18.2

135.0

2.8

20.0

8.5

6.6

0.9

0.7

4.5

2.4

10.9

10.0

7.3

373

-0.3

2014

45,200

16,099

4,126

-19,718

45,707

-6,879

38,828

-6,789

-475

12,396

-1,326

-8,104

2,491

41,409

77,321

118,729

2015

5.8

10.2

139.3

1.2

19.9

20.5

11.7

0.9

0.7

9.3

1.0

4.3

6.5

455

122

114

-0.3

2015

20,992

12,103

-9,314

-9,728

14,053

-3,833

10,221

-148

-3,981

-583

-25,938

-917

-3,237

-30,674

-20,602

118,729

98,128

2016E

-1.8

2.2

137.9

-0.4

20.0

-68.1

54.1

0.9

0.5

-14.3

-0.3

-1.3

-1.2

6.0

435

122

105

-0.4

2016E

-10,716

13,986

44,204

2,875

50,348

-8,081

42,267

-50

-8,131

-711

984

273

42,489

98,128

140,617

2017E

7.2

11.4

143.5

1.4

20.0

16.7

10.5

0.8

0.5

9.0

1.2

5.1

5.0

7.3

415

122

-0.3

2017E

20,863

15,428

-49,110

-7,550

-20,369

-9,612

-29,981

-50

-9,662

-717

-4,019

-4,736

-34,767

140,617

105,850

2018E

7.5

12.1

149.3

1.5

20.0

15.9

9.9

0.8

0.4

6.4

1.3

5.2

5.1

8.2

395

122

-0.4

Cash Flow Statement

Y/E Mar

Adjusted EBITDA

Non cash opr. exp (inc)

(Inc)/Dec in Wkg. Cap.

Tax Paid

Other operating activities

CF from Op. Activity

(Inc)/Dec in FA & CWIP

Free cash flows

(Pur)/Sale of Invt

Others

CF from Inv. Activity

Inc/(Dec) in Net Worth

Inc / (Dec) in Debt

Interest Paid

Divd Paid (incl Tax) & Others

CF from Fin. Activity

Inc/(Dec) in Cash

Add: Opening Balance

Closing Balance

(INR Million)

2018E

25,462

12,815

10,363

-7,917

40,722

-10,687

30,035

-50

-10,737

-717

-4,215

-4,932

25,053

105,850

130,903

11 February 2016

BHEL

Corporate profile

Company description

BHEL is India’s dominant producer of power and

industrial machinery and a leading EPC company,

established in the late 1950s as the government’s

wholly-owned subsidiary. The company has 14

manufacturing divisions, 8 service centers, 4 power

sector regional centers besides project sites spread

across all over India and abroad. It has a

manufacturing capacity of 20GW spread across

multiple factories in India; including for thermal,

hydro and gas projects.

Exhibit 1: Sensex rebased

Source: MOSL/Bloomberg

Exhibit 2: Shareholding pattern (%)

Promoter

DII

FII

Others

Sep-15

63.1

17.6

15.6

3.7

Jun-15

63.1

17.3

16.1

3.5

Sep-14

63.1

16.9

15.7

4.3

Exhibit 3: Top holders

Holder Name

LIC of India

Comgest Growth PLC A/C. Comgest Growth

Emerging Markets

Lazard Asset Management LLC A/c Lazard

Emerging Markets Portfolio

Magellan

LIC of India Market Plus -1 Growth Fund

% Holding

9.4

1.2

1.1

1.0

Source: Capitaline

Note: FII Includes depository receipts

Source: Capitaline

Exhibit 4: Top management

Name

Atul Sobti

D Bandyopadhyay

I P Singh

Designation

Chairman & Managing Director

Director (Human Resources)

Company Secretary

Exhibit 5: Directors

Name

Subrata Biswas

A N Roy

Keshav N Desiraju

Rajesh Kishore

S K Bahri

Name

Amitabh Mathur

Harinder Hira

R Swaminathan

Rajesh Kumar Singh

Source: Capitaline

Exhibit 6: Auditors

Name

Anjaneyulu & Co

DSP & Associates

J V Ramanujam & Co

Jugal K Puri & Associates

Narasimha Murthy & Co

Type

Statutory

Cost Auditor

Source: Capitaline

Exhibit 7: MOSL forecast v/s consensus

EPS

(INR)

FY16

FY17

FY18

MOSL

forecast

5.5

10.8

Consensus

forecast

4.2

8.7

11.2

Variation (%)

31.9

24.4

-3.4

Source: Bloomberg

11 February 2016

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