Buy Bharat Heavy Electricals; target of Rs 110: Edelweiss

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

live

• bselive
• nselive

Volume

Todays L/H

More

×

Edelweiss' research report on Bharat Heavy Electricals

We had upgraded BHEL to ‘BUY’ in July 2016 anchored by a few positive triggers on the horizon. Of these, thermal ordering/demand has not picked up materially, which remains a key monitorable. On the positive side though, the company’s executable order book (OB) has jumped to 78% (54% last year) in H1FY18 as execution of slow-moving orders has gathered pace and gross margin has improved to ~40%. Consequently, FY19/20 earnings visibility has improved along with potential for further improvement in working capital as thermal projects gather momentum. Maintain ‘BUY’ with DCF-based revised TP of INR110 (earlier INR115, implying FY19E PE at 23x) given reasonable working capital improvement potential and a medium-term revival in thermal demand from current 6-8GW p.a.

Outlook

We believe, such transition will be slower and tendering for conventional energy would range in 10-12GW (including replacement) in foreseeable future, where BHEL commands significant market share (~65%). We maintain ‘BUY/SP’.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.

Read More