Moneycontrol Bureau
Bharat Heavy Electricals (BHEL) shares rallied nearly 5 percent intraday Tuesday after CLSA says power equipment orders are at five-year high and the company swept bids with 76 percent market share in boilers and 89 percent in turbine tenders. The brokerage has assigned outperform rating to the stock, saying the state-run power equipment maker could report 40 percent year-on-year growth in FY16 order inflows.
According to its note, bottom-up analysis of power-equipment bids points to a turn in the capex cycle after five years, which is indicated by an 87 percent increase in bids opened to 20GW and more so by 27 percent YoY growth in order placement for the new generation equipment.
New order placement for power generation equipment grew to 12GW in FY16 due to a recovery in state power generation companies' orders, while NTPC orders disappointed, says the brokerage.
CLSA further says BHEL maintained its leadership in power generation equipment market in FY16, by winning 95 percent and 81 percent of the orders for boilers and turbines, respectively, adding company’s market share in lowest bids for boilers and turbines were 76 percent and 89 percent, respectively. Other winners were Toshiba and Alstom, it says.
According to the brokerage, pricing was mixed - BHEL's pricing was stable for Telangana orders versus last year while Doosan bid aggressively for 4GW boilers. L&T-MHI lost many bids by a thin margin.
"We now look for demand growth led by Ujwal Discom Assurance Yojana (UDAY) reforms and order execution to turn around BHEL's top line/margins in FY17.
However, Rakesh Arora of Macquarie disagreed with CLSA, saying BHEL is unlikely to make any profit in foreseeable future. He has a negative view on the stock.The company posted a massive loss of Rs 1,102 crore in October-December quarter against profit of Rs 212.6 crore in year-ago period. Revenue declined 14 percent YoY to Rs 5,325.6 crore during the quarter.
At 14:23 hours IST, the scrip of Bharat Heavy Electricals was quoting at Rs 116.45, up Rs 4.50, or 4.02 percent on the BSE.Posted by Sunil Shankar Matkar
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