BHEL plunges 19% after earnings decline
Shares in Bharat Heavy Electricals fell as much as 19.8 per cent, after its quarterly profit dropped 49 per cent on sharply lower sales in its power and industry businesses in a slowing economy.
The net profit drop prompted Deutsche Bank to downgrade the company to a "sell" rating on concerns about BHEL's balance sheet and a slowdown in its project execution, as several of its customers were unable to pay for their existing orders.
State-run BHEL, India's top power equipment maker, said on Saturday net profit slumped to Rs 470 crore in the April-June quarter from Rs 920 crore a year earlier.
It was the fourth consecutive quarterly fall in net profit and below analysts' expectations. Analysts, on average, had expected a consolidated net profit of Rs 750 crore, according to Thomson Reuters I/B/E/S.
BHEL shares closed 19.25 per cent lower at Rs 120.80.
BHEL's EBITDA margin fell below expectations to 6 per cent compared to 14.2 per cent over the same period a year ago, according to Deutsche Bank.
"Agreed, India has to add a lot of power capacity and money supply could improve over the next 6-12 months, but delays in projects have hurt viability, making us believe there may be a few write-offs in the BS (Balance Sheet)," Deutsche Bank said in a research note.
The company's outstanding order book stood at Rs 1.086 lakh crore compared to Rs 1.152 lakh crore in the previous quarter.
BHEL posted its results on Saturday, a day after Prime Minister Manmohan Singh visited the southern state of Tamil Nadu to show off new power projects by the company.
BHEL's local rival, Larsen & Toubro last month warned of more speed bumps after surprising investors with a profit drop as the protracted economic slowdown took a toll on infrastructure spending.
India, Asia's third-largest economy, is growing at its slowest pace in a decade and project bottlenecks, largely because of problems in acquiring land and high funding costs, have sapped investment in the infrastructure industry.
Copyright Thomson Reuters 2013