You are on page 1of 18

BHEL

Valuation Exercise
Annual Report
80% Supply equipment to power sectors
What does the company do? Fortunes would be linked to power sector growth
Who is the customer
Who is the competition
Key Drivers Understand growth in power sector - Capacity Addition in India
What has been happening with the company Understand their revenue and cost drivers
Capacity data
Working Capital
FinShiksha
Understand growth in power sector - Capacity Addition in India
BHEL
( in Rs crs) FY10 FY11 FY12 FY13 FY14 FY15
Revenue from Operations 34,154 43,337 49,510 50,156 40,337
Less: Excise Duty 1,292 1,771 2,282 2,539 1,949
Net Revenue from operations 32,861 41,566 47,228 47,617 38,388
Other Operational Income 493 680 751 807 720
Other Income 1,155 1,021 1,266 1,122 1,616
Total Operating revenue 33,355 42,247 47,979 48,424 39,108
Expenses
Cost of Material 20,672 23,209 28,908 27,899 21,461
Increase in WIP -787 -127 -823 116 1,057
Employee expense & benefits 6,449 5,397 5,466 5,753 5,934
Other Manufaturing and operating expense 2,155 2,536 3,223 3,777 6,136
Provisions -934 2,715 1,403 1,566
Cost of job done for internal use -121 -69 -104 -76
Total Operational Expense 27,435 33,661 38,072 39,035 34,588
EBITDA 5,920 8,585 9,907 9,389 4,520
Depreciation & Ammortization expense 458 544 800 953 983
EBIT 5,462 8,041 9,107 8,436 3,537
Interest 34 55 51 125 133
Prior period adjustments 7 -2 -19 - -6
EBT 6,591 9,005 10,302 9,433 5,014
Taxes 2,280 2,994 3,262 2,818 1,553
PAT 4,311 6,011 7,040 6,615 3,461
Dividend Paid 1,332 1,456 1,794 1,649
Shares OS 244.76 244.76 244.76 244.76
EPS 17.61 24.56 28.76 27.03
Dividend Per Share 5.44 5.95 7.33 6.74
FinShiksha
FY16 FY17 FY18
BHEL
( in Rs crs) FY10 FY11 FY12 FY13 FY14 FY15
Liabilities
ShareHolder Funds
Share Capital 490 490 490 490 490
Reserves & Surplus 15,428 19,664 24,884 29,955 32,557
Total Share holder's funds 15,917 20,154 25,373 30,445 33,047
Non-Current Liabilities
Long term Borrowings - 102 123 129 105
Advance from customers 8,663 6,829 4,959 6,600
Other Long Term Borrowings 128 479 729 830
Long term Provisions - 4,923 5,006 5,933 7,496
Total Non Current Liabilities 128 14,168 12,687 11,851 14,201
Current Liabilities
Short Term Borrowing - 1,286 2,550
Trade Payables 7,580 8,095 10,255 9,675 8,719
Other Current Liabilities 20,444 14,170 15,825 13,862 11,444
Short Term Provisions 4,418 2,673 2,636 3,009 2,830
Total Current Liabilities 32,442 24,939 28,716 27,832 25,543
Total Liabilities 48,487 59,260 66,776 70,128 72,791
Assets
Non-Current Assets
Tangible Assets 2,415 3,265 4,161 4,315 5,335
Intangible Assets - 136 136 144
Capital Work in Progress 1,551 1,723 1,325 1,134
Intangible Assets under development - 10 23 38
Total Fixed Assets 3,966 5,135 5,644 5,631 5,335
Non Current Investments 80 439 462 429 420
Deferred tax assets 1,527 2,164 1,546 1,551 1,969
Long term loans and advances - 883 900 905 1,167
Other Non Current Assets - 7,362 9,384 10,654 11,881
Current Assets
Inventories 9,235 10,852 13,548 11,764 9,798
Trade Receivables 20,689 20,104 26,357 29,234 28,072
Cash and Cash Equivalent 9,790 9,630 6,672 7,732 11,873
Short term loans 2,793 2,383 2,112 2,029 2,024
Other current assets 407 310 151 199 252
Total Current Assets 42,914 43,278 48,839 50,958 52,019
Total Assets 48,487 59,260 66,776 70,128 72,791
FinShiksha
Balanced 0 0 0 0
Working Capital 683 8,709 13,452 15,394
Change in Working Capital 2,429 8,027 4,743 1,942
FY16 FY17 FY18
FinShiksha
BHEL
( in Rs crs) FY13 FY14 FY15 FY16 FY17 FY18
Operating Cash Flow
Net Profit
Non Cash Charges
Increase in LT provisions
Change in Working Capital
Net Operating CF -
Financing Cash flow
Issue of share capital
New loans
Dividends distributed
Net Financing Cash flow -
Investing cash flow
Capital Expenditure
Other investments
Net Investing Cash flow -
Net Cash Flow -
Opening Cash
Closing Cash 7,732
BHEL
FY10 FY11 FY12 FY13
Liquidity Measures
Inventory Turnover Ratio Sales / Inventory 3.61 3.89 3.54 4.12
Receivable Turnover Ratio
Payable Turnover ratio
Inventory Days
Receivale days
payable days
Net working capital
Net working capital turnover ratio
Net working capital Days
Profitability Measures
EBITDA Margin EBITDA / Net Sales 17.7% 20.3% 20.6% 19.4%
EBIT Margin EBIT / Net Sales 16.4% 19.0% 19.0% 17.4%
PAT Margin
Return of equity
Asset Turnover Ratio
Financial Leverage
RoE Net Profit / Equity 27.1% 29.8% 27.7% 21.7%
Return on Asset
Return on Capital Employed
Leverage Ratio
Interest Coverage Ratio EBIT / Interest
Debt Equity Ratio
Debt Asset Ratio
Operating Performance Ratios
Fixed Asset Turnover Ratio
Valuation ratios
Price to Earnings Ratio
Price to book ratio
Price/ sales ratio
Price
BPS
Sales/share
FinShiksha
FY14 FY15 FY16 FY17 FY18
3.99 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
11.6% #DIV/0! #DIV/0! #DIV/0! #DIV/0!
9.0% #DIV/0! #DIV/0! #DIV/0! #DIV/0!
10.5% #DIV/0! #DIV/0! #DIV/0! #DIV/0!
BHEL
8/5/2014
3/31/2014 3/31/2015 3/31/2016 3/31/2017 3/31/2018
FY13 FY14 FY15 FY16 FY17 FY18 Terminal Value
Net Profit
Non cash charges
Increase in Net Working Capital
Change In LT Provision
Net Borrowings
Capex
FCFE
PV FCFE
Number of days left
Number of years left
Risk Free Rate
Beta
Market Return
Cost of equity
Terminal Growth
PV of explict Period
PV of TV
Cash
Total Value
Shares OS
Fair value/Share
CMP
EV
FinShiksha
Terminal Value
FY10 FY11 FY12 FY13
Revenue Drivers
Capacity MW 15,000 17,500 20,000 20,000
Order Book Rs Crore 144,300 164,100 135,300 115,100
New Order Booking Rs Crore 59,037 60,507 22,096 31,650
Power Sector Orders Rs Crore 41,982 46,393 14,012 25,560
Other Orders Rs Crore 17,055 14,114 8,084 6,090
Order Book as per Revenue Rs Crore 161,470 136,686 116,794
Order Book to Revenue Ratio 3.3 3.3 2.7
Power Capacity in India MW 220,000
Gross Revenue Rs Crore 34,154 43,337 49,510 50,156
Excise Duty as % of revenue % 3.8% 4.1% 4.6% 5.1%
Other Operational Income as % of revenue % 1.4% 1.6% 1.5% 1.6%
Cost Drivers
Raw Material Cost Rs Crore 19,886 23,082 28,085 28,015
Raw Material Cost as % of sales 60.5% 55.5% 59.5% 58.8%
Employee expense & benefits Rs Crore 6,449 5,397 5,466 5,753
Number of employees 46,274 46,748 49,390 48,399
Salary per employee 1,393,692 1,154,426 1,106,671 1,188,661
Increase in Salary -17.2% -4.1% 7.4%
Other Manufaturing and operating expense Rs Crore 2,155 2,536 3,223 3,777
Other Manufaturing and operating expenseas % of sales 6.6% 6.1% 6.8% 7.9%
Provisions Rs Crore -934 2,715 1,403 1,566
Provisions as % of sales -2.8% 6.5% 3.0% 3.3%
Depreciation Rs Crore 458 544 800 953
Gross Fixed Assets (Tangible + Intangible) Rs Crore 6,580 8,050 9,707 10,783
Depreciation as % of GFA 7.0% 6.8% 8.2% 8.8%
Interest Cost Rs Crore 34 55 51 125
Interest Cost as % of total debt #DIV/0! 54% 42% 9%
Taxation Rs Crore 2,280 2,994 3,262 2,818
Effective Tax Rate 45% 33% 32% 30%
FinShiksha
Capex Assumptions
Gross Fixed Assets per MW Capacity 0.44 0.46 0.49 0.54
Capex on account of New Capacity
Maintenance Capex (Depreciation)
Accumulated Depreciation Rs Crore 4,165 4,649 5,410 6,324
Debt Schedule
New Debt Raised
Old Debt Repaid
Net Debt Raised - - - -
Working Capital Analysis
Current Liabilities
Trade Payables Rs Crore 7,580 8,095 10,255 9,675
Other Current Liabilities Rs Crore 20,444 14,170 15,825 13,862
Short Term Provisions Rs Crore 4,418 2,673 2,636 3,009
Current Assets
Inventories Rs Crore 9,235 10,852 13,548 11,764
Trade Receivables Rs Crore 20,689 20,104 26,357 29,234
Short term loans Rs Crore 2,793 2,383 2,112 2,029
Sales Per Day Rs Crore 90 114 129 130
In terms of Days Sales Outstanding
Current Liabilities
Trade Payables days 84 71 79 74
Other Current Liabilities days 227 124 122 106
Short Term Provisions days 49 23 20 23
Current Assets
Inventories days 103 95 105 90
Trade Receivables days 230 177 204 224
Short term loans days 31 21 16 16
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
20,000
110,763
36,000
30,000
6,000
110,763
2.7
306000 425000
40,337
4.8%
1.8%
MW 119,000 Capacity Addition over next 5 years
40% Bhel's market share
MW 47,600 BHEL Order
22,518 Realization
58.7% 166,600
5,934
48,399
1,226,058
3.1%
6,136
16.0%
-
0.0%
983
12,642
7.8%
133
5%
1,553
31%
7,307
8,719
11,444
2,830
9,798
28,072
2,024
105
83
109
27
93
267
19
Capacity Addition over next 5 years
Bhel's market share
BHEL Order
Realization