Bharat Heavy Electricals LtdQ1 FY24Electrical Equipment

Bharat Heavy Electricals Ltd

Q1 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue 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).

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.

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Fundraise plans

The provided transcript from Bharat Heavy Electricals Limited's Q4 FY'24 Earnings Conference Call does not mention any current or planned fundraising through debt or equity. There were no discussions or disclosures related to: - Raising funds via equity issuance - Plans for debt financing or bond issues - Capital raising strategies or objectives Hence, based on the available information, BHEL has not indicated any fundraising activity through debt or equity either currently or in the near future during this call.

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.

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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