Way2Wealth is bearish on BHEL and has recommended sell rating on the stock in its October 30, 2012 research report.
"BHEL ‘s Q2FY13 results were below street expectations registering order inflows for the first half at Rs.87bn down by 48%yoy & an order backlog of Rs.1223bn marking a degrowth of 24%yoy. Revenues registered a growth of 9% for H1FY13, led by an incremental growth of 16% in the power segment & a degrowth of 13% in the industrial segment. Margins for the power segment have improved at19% whereas for the industrial segment it has registered a sharp decline at 21% for the first half."
“Amidst much hue & cry, BHEL declared a muted revenue growth much on lines with the faltering growth outlook for the power sector. Q2FY13 revenue grew by 2.3% aided by the growth in the power segment at15%yoy, while the industry segment revenues declined sharply by 31%yoy. Industrial revenue growth was impacted by slowdown in short cycle orders which has impacted the order booking & execution of transformers, valves from industries like cement & metals. Operating margins for the Industry segment has seen a sharp deterioration at21% against 27%yoy which has been offset by higher margin in Power segment at19.7%. Power segment margins have improved due to the impact of rupee appreciation on the imported supercritical components.”
“Economy slowdown & policy paralysis would continue its dampening effect on the overall growth, leading to a negative sentiment for the inflows in the power sector. Apparently BHEL would continue to face pressures on new order inflow growth, increasing domestic competition and declining order backlog trend putting pressure on its revenues & reduced ROE. We downgrade our rating from Reduce to sell on BHEL, at its CMP of Rs.227; it trades at a PE of 9x FY13E EPS of Rs.26 & 11x FY14E EPS of Rs.2,” says Way2Wealth research report.
Institutional holding more than 40% in Indian cos
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