Reduce BHEL - Nomura

We remain bearish on BHEL owing to continued structural concerns in the sector such as fuel supply shortage, land and environmental clearances, over-ordering of projects that could lead to project cancellations/deferments, and excess supply of equipment manufacturing capacity in the country that is leading to severe price competition.

While the company talked of a reasonable order pipeline for the next 15 months, we note that our estimates already build in much higher numbers and still suggest that revenues and margins are set for a multiyear decline for the company.

Accordingly, we retain our Reduce rating with a TP of INR174 on BHEL.

Source : Equity Bulls

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