BEPL- Q3FY21 Result Analysis

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The product prices have stabilized at an higher level. Also, the capacity utilization is at the peak level. Only little increase can be expected in terms of the company’s revenue on a quarter on quarter basis.

Coming to the profitability, well, this quarter was an aberration. The jump in profitability from ₹35cr to ₹136cr (Q0Q) is extraordinary which doesn’t happen regularly. 

Since prices are stable now, inventory gains wont be much.  Now, We can expected good profitability but not as good as Q3FY21.

Management of BEPL, don’t expect/want the prices to move up further as it would be detrimental for the user industries.  ABS realizations have reached an all time high. 

One may ask, Why would that be detrimental?

With increase in input cost, prices of end products rises. With increase in product prices, the consumption of end product goes down which again impacts the demand.

Valuation: if we consider a profit of 80 cr and EPS of 5 for Q4FY21, the TTM EPS comes to ₹15. At an PE ratio of say 15, the prices comes to ₹225 and an PE ratio of 20 takes it to ₹300.

Also Read on FinMedium:  My notes from various annual reports for 2020 – IT Sector (L&T Technology Services) – Factsbeyondnumbers

Risk: With the increase in input cost of raw material, end product manufacturer has already started increasing product prices. For example, recently Maruti Suzuki raised prices by ₹35,000 for some models. To add to that, if there is any interest increase by the RBI, it could derail the growth momentum.



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Shekhar Yadav

Shekhar Yadav

It was only during the third semester in Engineering that Shekhar overheard a Gujarati guy in his class discussing stocks. After a few discussions with him, he realized that this was what he wanted to do in his life.
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