B H E L Q4 FY24 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
N/A
Order
Yes
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 3- BHEL targets a 12% to 15% CAGR growth in revenue year-on-year, based on the execution of its large existing order book (Page 9).
- Expectation to execute around 10 GW of capacity addition annually, with previous demonstrated capacity up to 12 GW (Page 14).
- Order inflows are strong, with 27 GW under construction and an additional 10 GW tendered, expecting annual orders of 10-12 GW in the near future (Pages 9 and 15).
- Focus on diversification with plans to achieve a 50:50 order split between power and industry sectors over the long term, with key growth areas including transmission, transportation (including railways), and defense (Page 7).
- Revenue growth is supported by timely project execution and improved payment terms, expected to enhance cash flows and profitability going forward (Page 14).
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Fundraise plans
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Capex plans
Yes- BHEL has formed corporate central procurement cell in Noida to streamline vendor management and improve procurement processes.
- The company is focusing on bringing back vendors who left and onboarding new vendors to support execution capacity, especially in EPC balance of plant projects.
- Strategic partnerships include a joint venture agreement with Coal India Limited for setting up a coal to Ammonium Nitrate plant (2,000 TPD capacity).
- Partnership with M/s HIMA Middle East for addressing railway signaling business.
- Defense sector focus with development of strategic equipment for the Indian Navy and alliances such as an SPV/JV with Germany's Rheinmetall.
- Exploring battery energy storage system opportunities with initial execution of BESS projects in collaboration with TERI and plans to expand EPC packaging for these systems.
- Capacity addition plan includes year-on-year execution capacity of around 10 GW in power sector.
- Emphasis on improving execution and vendor support rather than direct capacity expansions in-house for balance of plant.
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Margin guidance
Category 3- BHEL is targeting a 12% to 15% CAGR in revenue year-on-year for FY'25 and beyond, based on the large order book and execution potential.
- Profit After Tax (PAT) for FY'24 was Rs. 260 crores, with expectations of profitability improvement as legacy fixed-price contracts are completed.
- Gross margin has been declining over the past seven years but is expected to improve due to better supply chain management, new vendor onboarding, and improved execution.
- Timely execution and improved payment terms are key drivers for increased profitability and cash flow.
- Legacy order book of around Rs. 50,000 crores (mostly with pass-through) is expected to finish by next financial year, resulting in margin improvement.
- BHEL aims to balance order inflow between power and industry sectors (50:50) to diversify revenue and profitability.
- No specific EPS guidance shared; management emphasizes execution quality and operational efficiency for future earnings growth.
Order book
Yes- As of April 1, 2024, BHEL's total order outstanding is approximately Rs. 1,31,600 crore.
- Out of this, about Rs. 92,559 crore is from the power sector and Rs. 31,000-32,000 crore from the industrial sector.
- Around Rs. 52,000 crore of power sector orders were received in FY'24, with old legacy orders totaling Rs. 40,000 crore.
- Approximately Rs. 50,000 crore of legacy orders remain pending, excluding defense, nuclear, and Vande Bharat projects, expected to be completed by next financial year.
- The executable order backlog stands at around Rs. 1,24,000 crore after excluding roughly Rs. 7,000-8,000 crore non-moving orders.
- BHEL targets balanced order inflow from power and industry sectors in the long term with a shift towards 50:50 ratio.
- Notably, about 10 GW of new power projects are expected to be tendered or awarded in the near term, contributing to order inflow.
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What B H E L's management said in earlier quarters
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