Dec 07, 2017 12:46 PM IST | Source:

Buy BHEL, target Rs 110; debtor recovery to continue: Edelweiss

The firm believes that debtor recovery witnessed in FY17 is likely to continue going forward.

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Shares of Bharat Heavy Electricals (BHEL) was up 1.4 percent intraday Thursday. The brokerage house Edelweiss has maintained buy rating, while it cut target price to Rs 110 from Rs 115 per share.

According to the firm, the thermal ordering or demand hasn’t picked up, which remains a key monitorable.

Meanwhile, the company’s executable order book has jumped to 78 percent in H1FY18 as execution of slow-moving orders has gathered pace and gross margin has improved to approximately 40 percent.

Consequently, FY19/20 earnings visibility has improved along with potential for further improvement in working capital as thermal projects gather momentum.

However, the key risks includes that the few projects like Abhijeet/Visa Power completely gone down and the company has to infuse additional equity to commence the project and few quarters of low profitability.

The firm believes that debtor recovery witnessed in FY17 is likely to continue going forward.

Recently, the company has secured an order for the renovation and modernization of electrostatic precipitators at Kahalgaon super thermal power station in Bihar valued at over Rs 215 crore.

The share touched its 52-week high Rs 121.77 and 52-week low Rs 79.74 on 25 April, 2017 and 27 December, 2016, respectively.

Currently, it is trading 25.19 percent below its 52-week high and 14.25 percent above its 52-week low.

The company's trailing 12-month (TTM) EPS was at Rs 1.38 per share. (Sep, 2017). The stock's price-to-earnings (P/E) ratio was 66.01.

The latest book value of the company is Rs 87.96 per share. At current value, the price-to-book value of the company was 1.04. The dividend yield of the company was 1.73 percent.

At 10:34 hrs Bharat Heavy Electricals was quoting at Rs 91.10, up Rs 0.75, or 0.83 percent on the BSE.

The share slipped 15 percent in last 9 months.

Posted by Rakesh Patil
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