Buy BHEL; target of Rs 342: Maximus Securities

“BHEL’s 3QFY2012 sales stood at Rs 11,078 crores, up by 19% y-o-y, higher than general estimates backed by healthy execution. The Company maintained that execution on all power projects is on track and there are no instances of slow moving orders, which will help boost revenue.ss Due to strong execution, Power segment revenues picked up strongly at 58% y-o-y, unlike 1HFY2012 in which growth was muted at 9% y-oy. The segment sales of power was higher by 58% (to Rs 8711 crore or 79% of sales).”

“EBITDA margin in the industry segment has witnessed a phenomenal expansion of more than 2000bps y-o-y to 31.5% mainly due to execution of high margin orders. Order backlog of the company at the end of Dec 2011 was Rs 1,46,500 crores compared to Rs 1,61,000 crores at the end of Sep 2011. The company witnessed order cancellations of Rs 5,800 crores during the third quarter. BHEL has commissioned the country’s first 1200 kV ultra high voltage transformer at Bina in Madhya Pradesh. The development of the 1200 kV UHVAC system will go a long way in enhancing the transmission efficiency from power hubs to distant load centres.”

“At 11x FY13E EPS, BHEL’s stock price have corrected significantly in a year. We give a BUY recommendation on the stock with a target price of Rs. 342, with a rationale of (1) stock being undervalued, (2) possible downside in order intake has halted and we expect a revival in coming quarters,” says Maximus Securities research report.   

Institutional holding more than 40% in Indian cos

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