Wednesday, August 3, 2011

BHEL


Motilal Oswal is bullish on Bharat Heavy Electricals(BHEL) and has recommended buy rating on the stock with a target of Rs 2465 in its July 26, 2011 research report.
“BHEL reported muted sales growth in 1QFY12. Revenue grew 10% YoY to INR71b, lower than our estimate of INR82b. However, net profit grew in line with expectations, led by margin expansion and higher other income. EBITDA margin was up 10bp YoY at 15.3% (higher than our estimate of 14.6%). Net profit was INR8.2b (up 15% YoY, adjusted), in line with our estimate of INR8.1b. The management highlighted that revenue could have been higher by INR6b-7b, but for some operational issues at ports. This led to a delay in the delivery of certain imported components, in turn resulting in lower sales for the quarter. These issues have been resolved and we expect execution to accelerate in the remainder of FY12. The company maintains its sales guidance of ~20%.”
“BHEL booked new orders worth INR25b in 1QFY12 against INR108b in 1QFY11. Orders in the power segment declined significantly while the industrial and international segments posted healthy growth of 36% YoY. The company has an impressive pipeline of orders (of around 9GW, including NTPC bulk order) at advanced stage of booking and another 1,500-2,000MW of orders with letter of intent. The management maintained its guidance of 10% growth in order intake in FY12. Given the pipeline of projects, we expect BHEL to meet its guidance. EBITDA margin expanded by 10bp YoY to 15.3%, driven by improvement in industry segment margin. Profitability of the power segment declined sharply, due to change in product mix. We expect BHEL to maintain EBITDA margin of ~20% in FY12-13 (21% in FY11).”
“BHEL trades at 14x FY12E earnings and is attractively valued in context of the estimated 19% earnings CAGR over FY11-13. Our EPS estimates are INR138 (up 19%) for FY12 and INR164 (up 19%) for FY13. While concerns around the power sector may remain an overhang, pick-up in ordering will act as a key catalyst for the stock. Maintain Buy,” says Motilal Oswal research report.
Institutional holding more than 40% in Indian cos
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