BHEL's worries are not over yet

Even as Bharat Heavy Electricals Ltd (BHEL)’s recent share price movement (up 38 per cent since August-end) is reflecting the Street’s hope of a recovery, the company continues to give a disappointing performance. On Wednesday, BHEL reported a 64 per cent year-on-year fall in net profit for the September quarter, led by a 1,359-basis-point drop in operating margins to a mere 4.7 per cent. Lower execution and higher fixed cost, as well as component of low margin orders have hurt margins. Further, falling order book, losses in the industrial segment and the merged company, Bharat Heavy Plates and Vessels, have concerned the Street as reflected in its share prices, which fell 1.3 per cent on Wednesday to Rs 140.45. "Against the backdrop of poor results, I do not think there is reason to buy shares at these prices. Also, considering the prevailing situation in the industry, there are no major positive triggers. BHEL can fall to Rs 115-125 levels, and then one can consider buying it," said Rabindra Nath Nayak of SBICAP Securities. September quarter sales fell 15.2 per cent year-on-year to Rs 8,819 crore due to slow moving orders in the overall order book and slow execution on account of delays from the client and extended payments cycles. While this was largely known and sales came along expectations, the biggest disappointment came from net profits, far below expectations of Rs 798 crore. more at: http://www.business-standard.com/article/markets/bhel-s-worries-are-not-over-yet-113110601017_1.html