BHEL - Recent bids magnify margin risk; directional positive on competition, pipeline still inadequate - Kotak

BHEL has emerged as L1 bidder for two of RRVUNL projects (2X660 MW each). However bids at Rs54-55 bn (Rs40-42 mn/MW) seem quite aggressive and were about 10% lower than the L2 bid (L&T) and BHEL's own bid in the previous round of tendering.

We believe there may be two positives in the BTG space, thinning competition and improving inflow pipeline visibility. However, aggressive price quotes increase margin risks (at contribution level besides negative operating leverage).

We remain cautious with likely material decline in earnings over FY2014-15E.

Source : Equity Bulls

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