Buy BHEL; target of Rs 264: KRChoksey

“BHEL registered strong set of numbers as net sales increased by 7.5% to Rs.19,588.9 cr (adjusted growth of 25% on a YoY basis). The company also registered strong operating margins of 25.2%, on back of lower other expenditure, which lead to a EBIDTA growth of 20.7%. Depreciation cost increased sharply by 83% to Rs. 254 cr on back of capex. However, lower interest cost offset the increase in depreciation. Consequently, net profits increased by 20.8% on a YoY basis to Rs. 3,379.8 cr (adjusted growth of 38%). Order backlog at the end of the Q4FY12 stands at Rs.134,681 cr, 2.9x FY12 sales. For FY12, order inflow declined to 22,096 cr as issues related to environmental clearance, coal linkages continued to plague investments in power sector.”

“BHEL is targeting order inflows in the range of 14GW to 15GW. The company expects primarily central and state sector, including the L1 orders from NTPC (Boilers: 3 x 660 MW and 4 x 800 MW; Turbine: 2 x 660 MW and 2 x 800 MW) to contribute to the orders inflows. Approx 50% of the total order inflows are expected to come from projects which got deferred in current fiscal(FY12). For FY12, order inflow stood at Rs. 22,096 cr. Company bagged 2,800 MW of orders of total 4,000 MW that were released in FY12.”

“BHEL delivered strong operational performance. However, order inflows remain a concern as issues related to environmental clearance and coal linkages continues to plague investments in power sector. However, CMP of Rs. 208 BHEL is trading attractive valuations of 7.2x its FY12 earnings and 7.9x its FY13E earnings. Considering current attractive valuations, we recommend a BUY on the stock with price target of Rs. 264 (P/E of 10x FY13 Earnings),” says KRChoksey research report.

Bodies Corporate holding more than 50% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.