Moneycontrol Bureau
Shares of BHEL jumped 2 percent intraday on Friday riding high on investors' optimism. CLSA has upgraded the stock to buy with a revised target of Rs 320 from Rs 205 per share led by 10-17 hike in earnings per share (EPS), higher FY16 order inflows, better margins on lower materials and economies of scale on large order wins.
The brokerage feels BHEL will be the biggest beneficiary of potential doubling of Indian power equipment market to 20GW in FY16 and falling material prices. It has raised FY16 order inflow by 17 percent and is optimistic that EPS will be double over FY15-17.
"Its recent orders wins and lowest bidder gives 79 percent visibility of new orders. Good news is that 98 percent of the likely orders are from Govt. utilities and a lot of pre-ordering work has been completed, improving chances of pipeline translating into order inflows," it says in note.
CLSA is positive that BHEL's power equipment pipeline will rise to 26GW first time in five years which could be a positive surprise for the market. Key drivers of this reversal are allocation of captive mines to Govt. gencos, higher tax devolution in favour of states to support state capex and improved approvals. Also lower new power equipment orders over FY13-15 will likely lead to a risk of rising power deficits from FY1, it adds.
The brokerage expects BHEL to get better pricing on material sourcing as it would be the biggest importer of large forging and boiler quality steel in the world.
At 09:58 hrs BHEL was quoting at Rs 267.45, up Rs 3.10, or 1.17 percent on the BSE.
Posted by Nasrin Sultana
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