Upload
akash-gupta
View
65
Download
1
Embed Size (px)
Citation preview
Omkar, Akash, Akshay, Mohd. Safwan, Mayank, Vikas
Company Overview
Industry Overview
63.06%
2.25%5.26%
10.43%
14.18%
4.82% Promoter & Promoter Group
Mutual fund / UTI
FI/ Banks
Insurance company
FPI
Indivuidual
Introduction
Main Features• One of the Largest Engineering & Manufacturing Company
• 10,000 MW+ Power Project Commissioned/Synchronized
• Hydropower Project Commissioned 100% By BHEL
• Consistent Dividend Paying Company
Shareholder’s Structure
Financial Profile Valuation Risk Analysis Conclusion
Market Profile as on 10/10/2016Share Price Rs.135.9552 Week Low - High (Rs.) 90.40 - 219.70
Market Capitalization (Rs.in crore)
33275.12
P/B Ratio (2016) 1.01
Face value (Rs.) 2
Source: Annual Report, Team Calculations
2011 2012 2013 2014 2015 20160
10000
20000
30000
40000
50000
60000
4333749509.78 50156.48
40337.92
30947.0426586.51
Turnover (Rs. in crore)
Source: Annual report 2015-16Industry
OverviewFinancial Profile
Company Overview Valuation Risk Analysis Conclusion
2010-11 2011-12 2012-13 2013-14 2014-15 2015-160
20000400006000080000
100000120000140000160000180000
6050
7
2209
6
3165
0
2800
7
3081
4
4372
7
1641
00
1353
00
1151
00
1015
00
1010
00
1107
30
Orders Received and Orders Outstanding(Rs. in crore)
Orders Recieved Order Outstanding
Source: Annual Report, Team Calculations
11-12 11-12 13-14 14-15 15-160
2000
4000
6000
8000
10000
12000
14000
16000
8138 9298 8563 8230
13061
27230
27032000
1180
Contribution to India's Utility Power Generation Capacity ( in MW)
Capacity Addition Synchronization
BHEL 55%
Non-BHEL 45%
Installed Capacity- Utility* 2,65,598 MW (31.03.16)
BHEL58%
Non-BHEL42%
Generation – Utility* 896 BU (2015-16)
Recommendation
Reasons
• Backlog of order book• EBITDA Margin (Y-o-Y)• Execution of JDU project and
intense competition
Recommendation
Company Overview
Industry Overview
Financial Profile Valuation Risk Analysis Conclusion
80%
11%
9%
Sector wise Order Book Outstanding
Power Sector Indusry Sector International Operation
SELL
Businesses Description
Company Overview
Industry Overview
Financial Profile Valuation Risk Analysis Conclusion
201520142013201220112001 - 101991 - 001981 - 901971 - 801964 -70
Incorporated as ‘Bharat Heavy Electricals Limited’ with 100% ownership of “GOI”
Added plants to manufacture Ceramic Insulators, Boiler Auxiliaries, Industrial Valves and NCES products
Crossed Market Cap. of over INR 1 trillion (US$16.7 bn)
Manufacturing Capacity augmented to 10,000 MW per annum
Cumulative installed capacity of worldwide projects crossed 1,00,000 MW
Commissioned India’s first Ultra High Voltage AC 1200 kV Transformer
Realized the capability to deliver 20,000 MW p.a. of power equipment
Cumulative power projects installed worldwide crossed 1,50,000 MW
First indigenously manufactured 800 MW Boiler synchronised for APPDCL at Krishnapatnam
Bagged its first export order for boilers (2x60 MW) for Thermal Power
Station in MalaysiaSetup of Corporate R&D division
The company has been earning profits continuously since 1971-72 and paying dividends uninterruptedly since 1976-77
Converted into a public limited company
Entered into a gas turbine JV with GE
Listed on NSE and BSE
Ranked as the 9th Most Innovative Company in the World by Forbes
Becomes the first company in India to develop and manufacture 1200 kV, 333 MVA Transformers
Commissioned new rating 525 MW thermal sets first time in India
Crossed INR 500 bn (US$ 8.3 bn) Turnover mark
First BHEL made 660 MW Supercritical unit commissioned
First indigenously manufactured Supercritical set of rating 660 MW commissioned by BHEL at NTPC Barh-5
Developed breakthrough Fuel Flexible Boiler design
Industry Overview
Competiton
Buyer
SupplierNew Entrants
Substitute
1
2
3
4
5
The capital goods & engineering turnover in India is expected to reach US$ 125.4 billion by FY17
Mechanical and Engineering industries during April 2000 to March 2016 stood at around US$ 3,068.1 million, as per data released by the Department of Industries Policy and Promotion (DIPP)
Reduced the basic customs duty from 10 per cent to 5 per cent on forged steel rings used in the manufacture of bearings of wind operated electricity generators
Spending on engineering services is projected to increase to US$ 1.1 trillion by 2020
Source: http://www.ibef.org/industry/engineering-india.aspx
Industry Overview
Company Overview
Industry Overview
Financial Profile Valuation Risk Analysis Conclusion
Source: Team Calculations
PORTER’S FIVE FORCES
BHEL vs COMPETITORS
2011 2012 2013 2014 2015 2016-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%29.83%
27.75%
21.73%
10.89%
4.16%-2.76%
22.15%17.67% 16.85%
12.49% 13.63% 12.28%
ROE
BHEL PEERS MEDIAN ROE
1 LARSEN & TOUBRO
2 SIEMENS INDIA
3 BHEL
4 ABB INDIA
5 THERMAX
Source: YAHOO FINANCE
Industry Overview
Company Overview
Financial Profile Valuation Risk Analysis Conclusion
Source: Yahoo FinanceSource: Annual Report, Team Calculations
Financial Profile
2011 2012 2013 2014 2015 2016-2000
0
2000
4000
6000
8000
10000
12000
9604.2911153.5
10511.1
6129.85
3308.98
-514.25
EBITDA (Rs. in crore) & EBITDA Margin (%)
23.11%
23.62%
22.07%
15.97%
11.20%
-2.05%
Financial Profile
Industry Overview
Company Overview
Financial Profile
2011 2012 2013 2014 2015 2016
-4000
-2000
0
2000
4000
6000
8000
10000
120009060.16999999
99910353.54 9557.71000000
001
5146.93
2231.66
-1449.89
EBIT(Rs. in crore)
2011 2012 2013 2014 2015 2016-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00% 26.40% 27.21%
22.59%
10.89%
4.82%
-3.17%
ROCE (%)
2011 2012 2013 2014 2015 2016-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%29.83%
27.75%
21.73%
10.47%
4.16%
-2.76%
Return On Equity (%)
Valuation Risk Analysis Conclusion
Source: Annual Report, Team Calculations
Return On Equity (ROE, Five components)
Company overview
Financial Profile
Industry Overview Valuation
DuPont Analysis
2011 2012 2013 2014 2015 201656.00%58.00%60.00%62.00%64.00%66.00%68.00%70.00%72.00%
66.75%68.33%
70.13%69.02%
66.32%
61.86%
Tax Burden
2011 2012 2013 2014 2015 201692.00%
94.00%
96.00%
98.00%
100.00%
102.00%
104.00%
99.40% 99.50%98.69%
97.42%95.89%
101.85%
Interest Burden
2011 2012 2013 2014 2015 2016
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00% 21.80% 21.92% 20.07%
13.41%
7.55%
-5.77%
Operating Profit Margin(EBIT/NET REVENUE)
2011 2012 2013 2014 2015 20160.00%
10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%
70.14% 70.73% 67.90%
52.74%43.15%
37.69%
Total Assets Turnover
2011 2012 2013 2014 2015 20160.00%
50.00%
100.00%
150.00%
200.00%
250.00%
300.00%
350.00%294.04%
263.18%230.35% 220.27%
200.87% 201.77%
Equity Multiplier (Financial Leverage)
Risk Analysis Conclusion
Source: Annual Report, Team Calculations
Company overview
Financial Profile
Industry Overview
2011 2012 2013 2014 2015 20162.502.602.702.802.903.003.103.203.303.40 3.35
3.14 3.103.21
2.82 2.80
Inventory Turnover Ratio
2011 2012 2013 2014 2015 201695
100105110115120125130135
109
116 118114
129 131
Inventory (Days)Activity Ratio
Valuation Risk Analysis Conclusion
2011 2012 2013 2014 2015 20160.00
0.50
1.00
1.50
2.00
2.502.04 2.03
1.71
1.341.09 0.99
Receivables Turnover Ratio
2011 2012 2013 2014 2015 20160
50100150200250300350400
179 179213
272
335368
Days of Receivables Outstanding
2011 2012 2013 2014 2015 20160.00
0.50
1.00
1.50
2.00
2.50
3.00
3.502.88
2.462.21
1.551.12 0.97
Working Capital Turnover
2011 2012 2013 2014 2015 20160
50
100
150
200
250
300
165129 133
234
285
207
Cash Conversion Cycle (Days)
Source: Annual Report, Team Calculations
Other Ratios
2011 2012 2013 2014 2015 20160.00
0.50
1.00
1.50
2.00
2.50
3.002.61
0.76
1.13 1.27
1.74
2.67
Order Received /Raw Material
Company overview
Financial Profile
Industry Overview Valuation Risk Analysis Conclusion
2011 2012 2013 2014 2015 20160.000.200.400.600.801.001.201.401.601.80
1.40
0.450.63 0.69
1.00
1.64
Order Received/ Sales
2011 2012 2013 2014 2015 2016-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%41.94% 42.87%
34.82%
16.17%
7.36%
-4.93%
Return On Capital
2011 2012 2013 2014 2015 2016-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
38.86%44.41%
40.99%
22.08%
9.57%
-6.22%
Earnings Yield
Source: Annual Report, Team Calculations
Company overview
Financial Profile
Industry Overview Valuation Risk Analysis Conclusion
2011 2012 2013 2014 2015 20160.00
0.50
1.00
1.50
2.00
2.50
1.74 1.701.83
2.042.19 2.22
CURRENT RATIO
2011 2012 2013 2014 2015 20160.000.200.400.600.801.001.201.401.601.802.00
1.30 1.231.41
1.65 1.73 1.76
QUICK RATIO
2011 2012 2013 2014 2015 20160.00
0.10
0.20
0.30
0.40
0.50
0.60
0.39
0.230.28
0.46 0.440.48
CASH RATIO
Solvency Ratios
Source: Annual Report, Team Calculations
Valuation
FORWARD MULTIPLES
Industry overview Valuation Risk Analysis ConclusionCompany
overviewFinancial Profile
Relative Valuation
1.32 1.24
2.84 2.65
2.26 1.96
3.82 3.47
2.39 2.10
PEER GROUP SELECTION CRITERIA
• Companies major business is in power sector• Capital goods producer and engineering
BHEL
ABB INDIA
LARSEN & TURBO
SIEMENS INDIA
THERMAX
Price/Book value
1.01
8.10
3.32
8.61
4.19
5.04
P/REVENUE
2016 2017(E)
EV/REVENUE
2016 2017(E)
0.93
2.84
2.44
3.64
2.382.45
0.87
2.65
2.12
3.31
2.092.21 2.52 2.28INDUSTRY AVERAGE
2016
Source: Annual Report, Team Calculations
Industry overview Valuation Risk Analysis ConclusionCompany
overviewFinancial Profile
FCFF Analysis
Tax Rate 38.14%After Tax Kd 17.94%Ke 8.17%Debt Weightage 0.36%Equity Weightage 99.64%
WACC 8.21%
Assumption: FCFF Growth Rate -4.50% CAGR (NET SALES)
2017E 2018E 2019E 2020E1 2 3 4
FCFF 3335.67 3255.79 3177.88 3133.68Terminal Value 30692.28Present Value of Free Cash Flow 3082.59 2780.49 2508.04 2285.52PV of Terminal Value 22385.13
Total Present Value of Cash Flow 33041.79
Less: Net Debt 9959.7
Value of Equity 23082.09No of Shares Outstanding 244.76
EQUITY VALUE PER SHARE (Rs.) 94.30Source: Team Calculations
ROCE
Capital Employed
CapexCost of Capital
Margin Of Safety
-20%
0%
20%
WEALTH CREATION
Motilal Oswal’s Five Forces of Wealth Creation ©
Industry overview Valuation Risk Analysis ConclusionCompany
overviewFinancial Profile
Source: www.marketsmojo.com
BHEL vs NIFTY 50
5 YEARS RETURN 1 YEAR RETURN
Industry overview Valuation Risk Analysis ConclusionCompany
overviewFinancial Profile
Risk Analysis
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
33.40% 25.00% 41.70%
Sector-wise Contribution To Installed Generation Capacity, FY 2016
State Sector Central Sector Private Sector
Source :www.pwc.in/assets/pdfs/publications/2016/round-the-clock-power-supply.pdf
BHEL vs POWER SECTOR
CO
NTR
IBU
TIO
N
UDAY scheme (Ujwal DISCOM Assurance Yojana) as of march 2015, the
aggregated accumulated losses of discoms are, Rs 3.8 lakh crore and their
outstanding debt is Rs 4.3 lakh crore.
IPDS (Integrated Power Development Scheme) is basically a new avatar of
R-APDRP scheme in which funds are provided for reduction of AT&C
losses, up gradation of infrastructure, it based billing and auditing system and
collection efficiency.
DDUGJY (Deendayal Upadhyaya Gram Jyoti Yojana) focuses on feeder
separation for rural households and agricultural.
Industry overview Valuation Risk Analysis ConclusionCompany
overviewFinancial Profile
Source: Power for All, MoP
Industry overview Valuation Risk Analysis ConclusionCompany
overviewFinancial Profile
59.0%
7.0%
4.0% 10.0%
ESTIMATED SECTOR- WISE COAL CONSUMPTION IN INDIA(2016-2017)
ELECTRICITY IRON & STEEL CEMENTOTHERS NON- ELECTRICITY
BHEL vs POWER SECTOR
The Coal Sector is Burdened with Taxes such as payment for
District Mineral Foundation (DMF), payment of National Mineral
Exploration (NMET), both as a percentage of Royalty, and Clean
Energy Cess that has been Increased to INR 400 per tonne for
2016-17
State-owned CIL's 66 projects are facing delays due to reasons
including land acquisition problem as well as rehabilitation and
resettlement issues
Loss of Rs. 1.85 Lakh cr. Estimated by CAG (Comptroller and
Auditor General) in coal allocation
Source :www.dnaindia.com/money/report-coal-india-s-66-coal-mine-projects-facing-delays
Source: .pwc.in/icc-coal-report
Order Back Log Unsound Financial Position
Decreasing Operational Efficiency
SELL
CONCLUSION
Industry overview Valuation Risk Analysis ConclusionCompany
overviewFinancial Profile