BHEL slides over 2.5% post Q2 numbers; Macquarie tags underperform, UBS reiterates sell

Research firm Macquarie has maintained a high conviction underperform rating on Bharat Heavy Electricals with a target of Rs 72 per share. The house is of the view that Q2 numbers for BHEL is weak all around and believes that some of the profit was eked out due to forex gains.

The firm is of the view that BHEL needs 19 percent revenue growth in H2 to reach to FY18 consensus number of Rs 31,000 crore adding that bulk of the positives, like restart of stalled projects and L1 pipeline is factored in.

With slow revenue turnaround, the entire operating leverage story falls flat. Structural headwinds remain with renewables, NPA in thermal power and under-utilisation of existing plants, it said.

Global research firm UBS has reiterated a sell call on Bharat Heavy Electricals with a target of Rs 49 per share. It believes that medium-term challenges remain while stagnating order book and low visibility of RoE improvement underpin sell call.

The firm is of the view that revenues missed estimates resulting in EBITDA loss. Abundant untied thermal capacity, thermal capacity under construction and sharp decline in renewable tariffs to keep order inflows low adding that medium term order inflows are unlikely to surpass FY18-19 revenue estimates.

It expects stagnation in order book, slow momentum in the non-power business and weak of return on equity.

At 09:22 hrs Bharat Heavy Electricals was quoting at Rs 90.50, down Rs 2.65, or 2.84 percent. It has touched an intraday high of Rs 91.50 and an intraday low of Rs 90.00.