 "Bhel crashes and hits 7-month low: Why analysts have no hope in the stock")
Shares in Bharat Heavy Electricals (Bhel) fell as much as 12.3 percent in morning trade today after its April-June earnings declined 49 percent from a year earlier.
India’s top power equipment maker on Saturday said net profit slumped to Rs 470 crore for the first quarter of financial year 2013-14 against a net profit of Rs 920 crore in the year-ago period, significantly lower than estimates.
Top-line declined to Rs 6,352.5 crore in the first quarter of current fiscal from Rs 8,326.24 crore in the same period a year ago. Even the power segment registered revenue decline of 20.6% year on year while the industry segment showed a steep revenue decline of 34.4% year on year.
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The company management attributed the drop in sales tocustomer delays in orders due to cash constraints and delays in receiving clearances for several orders.Key clients facing delays include Bajaj Hindusthan, Monnet Power and Abhijeet Industries.
Bhel itself has taken a more cautious stance and has suspended execution of orders due to non-payment of dues from customers.
“We maintain our negative stance on BHEL and maintain a sell target for the stock to factor in lower order inflow and execution of industrial segment, further impact of negative operating leverage and lower other income,” said ICICI Securities in a research report.
According to the brokerage, the major concerns remain weakening execution environment in the power sector coupled with macro slowdown, a lower demand situation and lack of reforms. Add to that reduced revenue visibility due to shrinkage in order book and a sticky cost structure.
Even Kotak has a sell rating on the stock.
“Results show a clear break in performance trajectory as so far none of the quarters has been as weak on margins and execution. Such a performance had long been anticipated and panned out very strongly in 1QFY14. We believe the run may continue over the next two years until inflows revive,” it said in a report.
At 11:58 am the stock was down 15 percent while the BSE Sensex was up 0.43 percent. The stock had underperformed the market over the past one month till 2 August 2013, declining 18.67 percent compared with the Sensex’s 1.54% fall.