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Research
BHEL - Beats on headline; growth outlook weak - Edelweiss
Posted On : 2013-04-08 21:21:09( TIMEZONE : IST )
BHEL's provisional PAT for FY13 and Q4FY13 is ahead of ours and Street expectations owing to higher-than-expected revenues. Importantly, the company has been able to meet its order inflow guidance of INR300bn for FY13 on the back of robust orders from select PSUs (NTPC, RRVUNL). The order book stands at INR1.15tn, down 15% YoY. The management has indicated 16GW of ordering in the pipeline during FY14E in the country. We maintain 'HOLD' with a target price of INR216.
Meets revenue and order intake guidance; PSU traction helps OI
On the back of improved execution and ordering by selects PSUs in Q4FY13, BHEL met its FY13 guidance, which stood at INR500bn for sales and INR300bn in order intake. The company's Q4FY13 order inflow jumped 53% YoY to INR205bn. For FY13 also order inflow increased 43% YoY to INR315bn (9.6GW in FY13 vs. 3.9GW), led by 61% YoY increase in power segment to INR225bn. While full details are awaited, PAT margins dropped by 230bps YoY for Q4FY13 and 160bps for FY13 on the back of pricing pressure.
FY14E pipeline at 16GW; Focus on metro, clean air technologies.
The management indicated project pipeline at 15-16GW, most of which belongs to the government sector. Cash position improved to INR60bn in Q4FY13 from INR35bn in Q3FY13. The company has bid for metro projects (recently submitted DMRC metro coach bid with Hitachi), which remains a key focus of the management for FY14E-15E. Recently, the company has also tied up with Mitsubishi Industries, for acquiring Flue-gas desulfurization (FGD) technology, application of which is in fossil fuel power plants.
Outlook and valuations: Weak outlook; maintain 'HOLD'
Weak revenue growth visibility coupled with sustained pricing pressure has been a key overhang for BHEL. Weak traction in private power utilities has been a major dampener leading to 50% + overcapacity in BTG industry impacting BHEL. The stock currently trades at P/E of 8.6x and 9.5x FY14E and FY15E, respectively. We maintain 'HOLD /Sector Performer' recommendation/rating on the stock with a target price of INR216.
