BHEL: Topline faces heat, but rising order flow can swing it

Capital goods major Bharat Heavy Electricals (Bhel) is witnessing a moderation in its sales growth over the past few quarters. Its performance in the June 10 quarter was another evidence that the company may have to focus on its shrinking growth in its topline. This, however, may not be challenging, considering its recent capacity expansion and burgeoning order book.

At 16%, its first quarter sales growth was the lowest in the past 10 quarters. Sales growth now averages 22% in the past four quarters against 33% on a year-on-year basis. On the other hand, lower proportion of raw material costs in sales aided a faster growth of 42% in operating profit. With raw material cost coming off peak globally and significant import dependency, the company may escape the input price hit, which many capital goods companies have seen in the past two quarters. However, there has been a significant increase in other cost items and provisions such as employee cost, depreciation and tax provisions, which rose by 20-30%.


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