Buy Bharat Heavy Electricals; target of Rs 370: ICICI Securities

Buy

ICICI Securitie's research report on Bharat Heavy Electricals

Revenues for Q1FY25 were flat at INR 55bn, up 10% YoY with industrial/ power segments’ revenues growing 36%/8% YoY to INR 13.6bn/INR 41bn. EBITDA loss narrowed to INR 1.7bn with a margin dip of 3% (7.1% YoY dip), as industrial EBIT margin grew to 4.7% (vs. 4.3% YoY decline) while power EBIT slipped 1.3% (vs. 3.1% YoY dip). As a result, PBT (loss) narrowed to INR 1.1bn (vs. loss of INR 4.7bn YoY). Reported loss stood at INR 2.8bn in Q1FY25.

Outlook

BHEL reported order inflow (OI) of INR 200bn (YTD) while the outlook for OI for remainder of the fiscal remains strong. BHEL has commended 100% market share in the orders for thermal power plants in FY24 and Q1FY25. We estimate >10GW of INR 700bn worth of opportunities in FY25. As a result, we expect its order book (OB) to further improve to INR 2trn in the next three quarters. Also, NTPC has guided to award new thermal power plants of up to 26GW by FY26E. As a result, we expect execution to ramp up, gross margins to expand and working capital to improve with the completion of legacy projects. BHEL continues to report subdued set of results due to subpar execution. However, we expect a ramp up in execution from FY26E onwards. We maintain BUY on the stock with a TP of INR 370.

For all recommendations report, click here

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.

ICICI_Bharat Heavy Electricals