Bharat Bijlee is an electric
equipment manufacturer company. Mainly it has evolved as a transformer
manufacturing company. Bharat Bijlee’s business areas can be segregated into
two broader segments i.e. a) Power Systems and b) Industrial Systems.
Power Systems: BBL is involved in three different areas namely a)
Transformers b) EPC Projects and c) Marketing and maintenance of products.
Transformer Segments: This has been a mute segment in the last
financial year. Though there has been increase in order inflow by 30% in terms
of unit, the profit margin has been hit owing to high input cost and
competition. The unexecuted order book for transformer segment as on 31-Mar-12
stood 12% higher compared to the financial year 2010-11. The outlook for this
segment is quite bright. There is major emphasis on Power segment from
government of India in the twelfth plan from 2012-17. This has been found that
to grow the GDP at the rate of 9%, the energy supplies have to grow at the
minimum pace of 6.5%. This does necessarily means that the distribution system
has to be improved in tandem. Transformer being an integral part of
distribution system, there will be substantial demand for transformer.
Though there are number of
competitors in the transformer segment, BBL has good market in the 220 KVA
segment.
BBL has established market out of
India and this will help BBL to get revenue from export. The last financial
year has seen 10% of the order booking come from abroad.
BBL has modernized one of the
transformer plants to international standard. This will augment to capture and
retain the international clients.
BBL is also working towards training
on high voltage transformer. This will help them to optimize the transformer
design.
Project segment: BBL also has seen 11% growth in its project
segment. However, BBL is not a major player in the Project segment and there
are international players competing in this segment. Going forward, if BBL keeps its focus on the transformer
segment, it will be beneficial for the investors.
Industrial Systems: This segment comprises of AC electric motors,
gearless machines for elevators, AC variable speed drives.
Motor Segments : BBL’s sales in motor segment has seen a growth of
28%. BBL is also looking into options of increasing the variation in motor
segments. However, this segment may face a challenge owing to falling price
realization and volatile commodity prices.
BBL has also doubled its sales in
drive business and will soon start manufacturing AC drives in collaboration
with KEB of Germany. Gearless elevator system has also registered 50% growth.
Overall, the performance if BBL
has been a muted performance majorly owing to lack of demand and higher input
cost. Whereas the input cost will remain a problem area for BBL, demand for the
transformers, motors etc are expected to be increased in the current financial
year. BBL has few strong areas over and above its competitors e.g. emphasis on
quality, fallback on one segment if the other one doesn’t work out as expected,
technical collaboration with KEB and last but not the least very impressive
debt to equity ratio.
Financials: BBL has good exposure in Siemens stock around 162.57
Lakhs. Siemens also comes under the commodity segment and hence the segment
performance always has ripple effect on BBL.
Currently BBL stock is trading at a trailing PE
of 13.69, which lower than its nearest peer EMCO, which is trading at 24.68. In
the last one month, the stock has been beaten down owing to its poor financial
report and down by 8%. Looking at the prospect of the power sector, investor friendliness
of the stock and the valuation of the stock, it can be hold for medium term.
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