BHEL and NTPC: Profits a study in contrast

It has been a contrast in performance when it comes to the two large state-owned companies — Bharat Heavy Electricals (BHEL) and NTPC.

While BHEL seems to have stepped on the gas with a 40% profit growth — nearly double the growth rate for the previous two quarters — NTPC’s profit growth has slumped from an average of 30% over past three quarters, to barely 2%. For BHEL, profit growth also contrasts with average growth in single digits for the previous four quarters.

Even though BHEL’s sales growth of 24% is slightly lower compared to the previous quarter, it has managed a significant improvement in its profitability. This has come about with an almost 8 percentage-point reduction in raw material/sales ratio. BHEL had been sitting on high-cost raw material inventory until Q1FY10, and has seen the benefit of commodity meltdown only in this quarter.

The company looks well-poised to maintain its momentum, with its 25-30% guidance for sales growth. BHEL will be expanding its capacity by half, by the end of this financial year, which will enable it to execute projects faster. While the company had to wait for two-to- three quarters to get the benefit of softer raw material prices, it is now pretty well-positioned on this front also.


ref:
http://economictimes.indiatimes.com/Views/Recommendations/Inputs-save-day-profits-a-study-in-contrast/articleshow/5154779.cms