Feb 06, 2013, 04.08 PM IST | Source: Moneycontrol.com

Motilal Oswal neutral on BHEL; target Rs 200

Motilal Oswal has come out with its report on Bharat Heavy Electricals (BHEL). The research firm has maintained a neutral rating on the stock with a target price of Rs 200, in its February 02, 2013 research report.

Motilal Oswal has come out with its report on Bharat Heavy Electricals (BHEL). The research firm has maintained a neutral rating on the stock with a target price of Rs 200, in its February 02, 2013 research report.

"BHEL's revenues at INR100b, down 5%, were in line with our estimates. However, EBITDA at INR16.3b, down 20% YoY, was significantly lower than our estimate of INR18b, down 12% YoY, led by lower-than-expected EBITDA margins (at 16% v/s our estimate of 17.4%). Net profit at INR11.8b, down 18% YoY, was in line with our estimate of INR12.3b, down 14% YoY, led by better-than-expected other income.

Revenues were impacted by execution delays, given tight liquidity conditions. BHEL has reduced execution in instances of delayed payments which has resulted into better cash collections in FY13 (up 18% YoY over YTD FY13). Order intake stood at INR19.5b, down 55% YoY, and is impacted by a fall in industrial and power sector orders. Order book stands at INR1.13t, with BTB (x) of 2.4x TTM (down from INR1.22t at 2QFY13- end), the lowest since past 4 years and is impacting revenues.

BHEL expects order awards of INR150-200b in 4QFY13, which is a significant improvement over INR107b in 9MFY13. During Jan 2013, BHEL already received orders of ~INR45b, which includes boilers for NTPC's Nabinagar project (1,980MW, INR28b), Mangdechhu hydroelectric project in Bhutan (720MW, INR7.5b), etc. Management stated that the bidding pipeline in the power segment is showing signs of improvement, with 1,800MW projects under evaluation, 5,300MW bids to be submitted in 4QFY13 and 7,000MW for which bids will be submitted in 1HFY14.

We model BHEL's order intake to improve 10% YoY in FY13E and expect orders in FY14E/FY15E to stabilize at INR250-300b pa (v/s INR267b in FY13). Maintain Neutral with a TP of INR200/sh (15x PER FY15E)," says Motilal Oswal research eport.

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