Accumulate BHEL - Kotak

BHEL had already reported provisional numbers in April 2012. The audited numbers for Q4 FY12 are higher than the provisional numbers aided by better margins and increased other income.

- The management estimates 24000-25000 MW of orders to be awarded in FY13. Out of which, BHEL expects to win orders 14000-15000 MW consisting of NTPC orders from the bulk tender and couple of state and private utility orders. The management indicated that ~ 7000-8000 MW of order pipeline are spillover projects that were scheduled to be awarded in the previous year.

- Sector Outlook - Industry heading towards a prolonged period of overcapacity. Consequently, we forecast revenues to decline by 3% in FY13 to Rs 490 bn. Revenue outlook beyond FY13 also appears to be subdued due to likely decline in order backlog.

- At the current price, BHEL is trading at a 8.2x FY13 earnings. Based on FY13E, the stock is trading at 4.5x EV/EBITDA multiple.

Source : Equity Bulls

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