BHEL : Q4FY11 Result Update

Orders On Track, Margin Surprises Positively

BHEL’s FY11 sales/ order intake was inline with management guidance. During FY11, BHEL reported gross sales of Rs 41,000 cr (up 20% YoY) & adj. PAT of Rs 5,700 cr (up 27% YoY)

The management highlighted that gross margins improved by 130bps on the back of increased indigenization, better vendor management, etc. Employee /sales were at ~13%.

Management’s guidance of 10% YoY growth in FY12E orders achievable:This is on the back of: (a) orders worth ~Rs 110 bn that spilled over from Q4FY11, (b) orders for Renovation & Modernization (R&M) of old BHEL projects worth Rs70-110 bn & (c) other pvt & CPSU orders.

Hold with a Target Price of Rs 2,380.