Reviews

In this edition, we have reviewed Tata Power CompanyBHEL. We suggest our reader-investors to HOLD in Tata Power Company and BHEL

We had previously recommended Tata Power Company in Volume 34, Issue No. 11, dated April 29-May 12, 2019, under the ‘Low Priced Scrip’ segment. The stock was then trading at Rs 67.75 and was recommended based on the company’s strong project pipeline, reduction in debt and steady growth plans. Tata Power Company is the largest integrated power company in India having its presence in segments such as fuel & logistics, generation, transmission, distribution and trading in the power sector. 

Looking at the quarterly trends on a consolidated basis, for Q2FY20, the company posted net sales of Rs 7,677.82 crore, which is an increase by 4.41 per cent compared to net sales of Rs 7,353.41 crore for Q2FY19. For Q2FY20, the company gained an operating profit of Rs 2,133.26 crore, registering a growth of 20.04 per cent from Rs 1,777.1 crore gained in Q2FY19. The company reported a net profit of Rs 163.21 crore in Q2FY20 as against a net loss of Rs 6.53 crore incurred in Q2FY19. 

Looking at the annual financial trend of FY19, the net sales of the company increased by 10.13 per cent to Rs 29,558.64 crore from Rs 26,840.27 crore in FY18. The PBDT increased by 19.02 per cent and stood at Rs 4,328.45 crore for FY19 as compared to Rs 3,636.82 crore for FY18. The net profit increased by 13.34 We had previously recommended Bharat Heavy Electricals Ltd. (BHEL) in Volume 34, Issue No. 17, dated July 22-August 04, 2019, under the ‘Low Scrip’ segment. The stock was then trading at Rs 64.65 and was recommended based on the company’s rising market share, healthy operating performance and its prudent management. BHEL is engaged in the designing, engineering, construction, testing, commissioning and servicing of a range of products which cater to the core industries in the Indian economy. 

Looking at the consolidated quarterly trends, net sales decreased by 8.81 per cent in Q2FY20 to Rs 6,030.16 crore from Rs 6,612.43 crore in Q2FY19. The profit before taxes reported for Q2FY20 was Rs 166.88 crore, falling by 2.74 per cent as compared to Rs 171.58 crore in Q2FY19. On the other hand, the net profit grew by 41.89 per cent to Rs 120.95 crore in Q2FY20, as compared to Rs 85.24 crore reported in the same quarter for the previous fiscal year. On an annual basis, the net sales grew by 5.34 per cent to Rs 30,367.65 crore in FY19 as compared to Rs 28,827.48 crore in FY18. For FY19, PBT increased by 52.29 per cent to Rs 1850.1 crore from Rs 1214.87 crore in FY18. Net profit for FY19 grew substantially to Rs 1,009.16 crore from Rs 438.19 crore gained in the previous fiscal year. per cent to Rs 1,279.23 crore in FY19 from Rs 1,128.68 crore in FY18. 

As for capacity expansion, the company intends to acquire stressed thermal power plants instead of constructing greenfield units or expanding current capacities. Post clarity on the Mundra project, the company’s financials and growth is expected to be steady. 

Hence, we recommend a HOLD.

We had previously recommended Bharat Heavy Electricals Ltd. (BHEL) in Volume 34, Issue No. 17, dated July 22-August 04, 2019, under the ‘Low Scrip’ segment. The stock was then trading at Rs 64.65 and was recommended based on the company’s rising market share, healthy operating performance and its prudent management. BHEL is engaged in the designing, engineering, construction, testing, commissioning and servicing of a range of products which cater to the core industries in the Indian economy.

Looking at the consolidated quarterly trends, net sales decreased by 8.81 per cent in Q2FY20 to Rs 6,030.16 crore from Rs 6,612.43 crore in Q2FY19. The profit before taxes reported for Q2FY20 was Rs 166.88 crore, falling by 2.74 per cent as compared to Rs 171.58 crore in Q2FY19. On the other hand, the net profit grew by 41.89 per cent to Rs 120.95 crore in Q2FY20, as compared to Rs 85.24 crore reported in the same quarter for the previous fiscal year.

On an annual basis, the net sales grew by 5.34 per cent to Rs 30,367.65 crore in FY19 as compared to Rs 28,827.48 crore in FY18. For FY19, PBT increased by 52.29 per cent to Rs 1850.1 crore from Rs 1214.87 crore in FY18. Net profit for FY19 grew substantially to Rs 1,009.16 crore from Rs 438.19 crore gained in the previous fiscal year.

An increase in orders for emission control equipment, railway transportation and waste management is expected with government focusing on these areas. BHEL boasts a strong order pipeline with effective cost control and execution, which is likely to aid the company in regaining a lost ground in an adverse operational environment. Thus, we recommend a HOLD.