Geojit BNP Paribas Upgrades BHEL to 'buy' - TP Rs.210

- Bharat Heavy Electricals Ltd has been upgraded to 'buy' from the 'reduce' rating earlier. The target price is Rs.210. The stock is currently quoted in the range of Rs.179 - Rs.180.

- The stock is upgraded to buy after the recent decline in stock price. The analysts also think that the order outlook for FY14 is not bad despite difficult environment.

- EPS estimates over FY14 -15 have been hiked by 7 - 9%, factoring higher margins and an improved order in-take leading to higher cash and consequently higher net interest income.

- Despite the ordering environment for power generation equipments remain challenging, a firm order pipeline of Rs.35790 crore is expected to come in FY14. It is expected that the company garnered around 60% of the order.

- The company is increasingly targeting non-BTG portion of orders. Any improvement in market share would drive upside the stock valuation.

- The target price has been hiked to Rs.210 from Rs.200 earlier, factoring in higher margin and improved order in-take. The stock is currently traded at 8 P/E of FY14 expected EPS versus the peer group valuation at 11P/E.

- Key risks to the TP are a potential 5% divestment by the government of India, delays in order in-take or loss of order to competitors, low margin and a slowdown in execution of orders.

Source : Equity Bulls

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