BHEL Q1FY23: Revenue rebound, losses narrow, backlog stays large

Bharat Heavy Electricals Ltd. reported a sharp year on year pickup in Q1FY23 revenue, but profitability remained negative as input cost inflation and limited pricing pass-through continued to weigh on margins. For the quarter, turnover rose to Rs 4,449 crore from Rs 2,724 crore, up 63 percent. Revenue from operations increased to Rs 4,672 crore from Rs 2,901 crore, up 61 percent. EBITDA stayed in the red at negative Rs 90 crore, though this was an improvement from negative Rs 399 crore a year ago. Profit after tax was a loss of Rs 192 crore versus a loss of Rs 445 crore in Q1FY22.

The quarter’s headline was clear. Execution and delivery intensity improved and the order book remained substantial, but the business environment commentary pointed to a persistent margin squeeze from industrial input inflation. The presentation also flagged macro constraints, noting that close to double digit fiscal deficits, a growing current account deficit and high public debt in a rising interest rate environment may limit fiscal space.

Operating momentum shows up in project milestones

BHEL highlighted several commissioning and synchronization milestones in Q1FY23, underscoring a focus on project deliveries.

It reported commercial operation declaration of Unit 3 of the 3x660 megawatt NPGCL Nabinagar project in Bihar under its steam generator package scope. Synchronizations were achieved for Unit 6 of 500 megawatt at NTPC Kahalgaon under combustion modification works for De-NOx, Unit 1 of 6x60 megawatt Balimela hydroelectric project in Odisha under renovation and modernization scope, and a 53 megawatt steam turbine generator set for Gallantt Ispat in Gorakhpur. It also reported progress on a solar project for MAHAGENCO in Maharashtra and commissioning of 20 megawatt at NTPC Gandhar in Gujarat.

Beyond site execution, the company also referenced manufacturing progress in the nuclear supply chain with dispatch of its 43rd steam generator from the Trichy unit for the Gorakhpur Haryana Anu Vidyut Pariyojna.

Backlog remains the biggest support for revenue visibility

As on 30.06.2022, BHEL’s total outstanding order book stood at Rs 99,967 crore. The mix was heavily skewed towards the power segment.

Order inflows during Q1FY23 were Rs 2,508 crore, comprising Rs 1,574 crore from power, Rs 869 crore from industry and Rs 65 crore from exports.

The list of orders received during the quarter included hydro turbine generator supplies and spares and repair orders in the power segment. In the industry segment, the company pointed to wins across transportation and transmission, including transformers, propulsion electrics for Kolkata Metro, and traction equipment for locomotives. It also cited a maiden entry into contract manufacturing for the steel sector through a BOF converter order.

The order book remains a key support because it provides revenue visibility over multiple quarters, particularly in the power segment. But the same concentration also makes profitability sensitive to execution pace and the margin profile of the power portfolio.

Margin pressure and working capital remain the central investor watchpoints

The presentation’s business environment section explicitly called out a key constraint: high inflation in industrial input material and market non readiness to accept higher prices, which is weakening profitability. That narrative aligns with the quarter’s numbers. Even with a strong year on year rise in revenue from operations, EBITDA remained negative.

Working capital is another area to track. As of Q1FY23, trade receivables stood at Rs 7,065 crore and contract assets at Rs 26,837 crore, taking the combined total to Rs 33,903 crore. The customer mix for this total was 36 percent central utilities, 42 percent state utilities, 15 percent private sector and 7 percent exports.

Large contract assets and receivables can be typical for long-cycle engineering and project businesses, but they matter because they can constrain operating cash flow. In turn, this can limit financial flexibility during periods when margins are under pressure.

Technology work continues in flue gas desulphurization and flexibility solutions

BHEL also shared updates on research and development and innovation work completed during the period. It completed design of a vacuum belt filter system and its control and instrumentation as part of in-house development of a gypsum dewatering system for flue gas desulphurization applications. It also completed hydraulic design of a slurry recirculation pump for flue gas desulphurization for a 5x800 megawatt project and completed a dynamic simulation study of flexible operations on an 800 megawatt turbine and regenerative cycle equipment.

These updates indicate ongoing product and solution development in areas adjacent to thermal power fleet upgrades, compliance and operational flexibility. The presentation does not quantify revenue impact, but such capabilities can influence win rates and execution competitiveness in retrofit and upgrade opportunities.

Takeaways

Q1FY23 showed a strong recovery in revenue versus the base of Q1FY22 and a meaningful narrowing of losses. The quarter also reflected tangible execution through multiple commissioning and synchronization events. The order book of nearly Rs 1 lakh crore remains the primary support for medium-term revenue visibility.

At the same time, the presentation was clear that input cost inflation and limited pricing pass-through are weakening profitability. Until margins turn positive and working capital intensity moderates, investors are likely to keep focus on cash conversion and the pace at which backlog converts into profitable revenue.