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Motilal Oswal Report
Bharat Heavy Electricals Ltd. reported another loss making Q2 FY22. While revenue stood ~10% above our expectation, lack of operating leverage led to losses at the operating level.
It reported a net loss of Rs 675 million, below our expected loss of Rs 2.3 billion, owing to lower other expenses (reversal of provisions ~Rs 1.8 billion) and revaluation of depreciation charges by ~Rs 580 million.
Adjusted for the above two items, losses are in line with our expectation.
Of the total order book of Rs 1.1 trillion, the executable order book stands at Rs 90 billion. Around 50% of the order book is fixed cost contracts, thus posing a risk to margin in a rising commodity price scenario.
While BHEL has maintained gross margin on a QoQ basis, the management expects some pressure in Q3 FY22 too, as it is still negotiating with customers to pass on the price increase.
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