Financial Daily from THE HINDU group of publications
Sunday, May 02, 2004
Financial Daily from THE HINDU group of publications Sunday, May 02, 2004 |
|
|
|
|
|
Investment World
-
Stocks Markets - Recommendation Bharat Electronics: Buy Sowmya Sundar
Product launches such as the Simputer should provide a new growth avenue.
The revenue growth for the full year ended March 2004 was in accordance with the management's projection at the beginning of the year. At the net level, the profit growth was lower than expected due to extraordinary items and provisioning.
Recommendation
The market appears to have factored in these developments. The stock has fallen sharply from its year high and trades at 12 times its consolidated per share earnings of Rs 39.6. Exposures can be considered in the stock as a good order-book gives revenue clarity over the next couple of years. Moreover, BEL has introduced several products for the commercial market such as Simputers, networking solutions and security-related products. It is also targeting the broadcasting segment with products for live news coverage and so on. With new markets opening up, BEL should be able to sustain the order booking momentum.
The numbers: What they mean
The 11 per cent dip in revenues and 18 per cent fall in net profits are deceptive on the face of it. The sharp drop in turnover in the last quarter ended March 2004 was primarily due to the management's conscious decision to spread over the revenue and profitability over the whole year instead of bunching it up towards the end of the year. In 2002-03, the company recorded close to 50 per cent of the revenues in the fourth quarter. When seen in this context, the impressive performance of the first three quarters and the dip in the last quarter are exaggerated. The performance was in line with the expectations except for the provisioning.
Order-book gives comfort
The company has an order book of Rs 6,650 crore. This is marginally lower than the order backlog of Rs 6,944 crore as on March 2003 indicating that the pace of order booking during the year has not increased. However, equivalent to 2.4 times its 2003-04 turnover, the order-book gives revenue clarity over the next couple of years.
Provisioning impacts margins
The drop in the operating margins to 15.1 per cent (15.9 per cent in the previous year) for 2003-04 is due to the unexpected provisioning and one-off expenses. But for these charges, the margins would have been 20 per cent. BEL had to make certain provisioning towards gratuity and leave encashment liabilities for employees. The expenses also included extraordinary items to the tune of 57.8 crore. The sharp surge in the operating margins, excluding the unexpected charges, could be on account of a stronger rupee, as the import content is high for BEL.
Group companies
On a consolidated basis, the contribution of the BEL's group companies has declined. BEL has a profitable joint venture. But two of its subsidiaries are going through a rough patch. The losses could have pulled down the contribution of the profitable venture at the consolidated level.
Article E-Mail :: Comment :: Syndication :: Printer Friendly Page
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | Home |
Copyright © 2004, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|