BHEL Q2 Net Profit Down 10 Per cent; Shares Fall

Bharat Heavy Electricals Ltd, India's biggest power equipment maker, posted a bigger-than-expected 10 per cent drop in its quarterly net profit on 26 October' 2012 on falling orders in a slowing economy.

 

The earnings results sent BHEL shares down more than 6 per cent.

 

India's power sector has been badly hit by shortages of coal and gas supplies, delays in environmental approvals for power and mining projects and drying up of funding -- severely denting the demand for equipment.

 

Many brokerages have downgraded state-run BHEL in the last few months, citing increased competition, slowdown in new orders and pricing pressure in an economy that slowed to 5.5 per cent growth in April-June, the lowest level in nearly three years.

 

BHEL said its net profit in the fiscal second quarter fell 10 per cent from a year ago to 12.7 billion rupees, while net sales in the period was nearly unchanged at Rs 104 billion.

 

According to Thomson Reuters I/B/E/S, analysts had expected a net profit of 13.4 billion rupees.

 

BHEL's order book stood at about Rs 1.22 trillion at the end of September, a company statement said, down from about 1.33 trillion at end-June, as power producers curb spending on equipment due to uncertainties plaguing the sector.

 

Shares in BHEL, which had a market value of $11 billion as of Friday, fell as much as 6.6 per cent to 226.40 rupees after the earnings on Monday. The fall wiped about $730 million from its share value.

 

The BHEL stock is down about 5 per cent this year, lagging the benchmark Mumbai market index  that has risen 20 per cent in 2012.

 

JPMorgan in September downgraded BHEL to "underweight" from "neutral" citing pricing pressure on new orders. Nomura also downgraded BHEL earlier this month and said rising competition and falling utilisation could impact its profit margins.

(Reuters)