Hold Bhel; target of Rs 56: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Bhel

BHEL reported net loss for 1QFY20 due to weak operating performance with 24% YoY revenue decline and EBITDA loss. Delay in dispatches due to lack of customer clearances, slow execution due to agitation at few of sites, were the key reasons behind such weak performance. Management expects things to normalize in the subsequent quarter. While order inflow during the quarter was lower at Rs39 bn, down 11% YoY, the company continues to maintain its leadership position in the FGD ordering (received 23GW out of 40 GW awarded and L1 in 19 GW). While collectable debtors have gone down by 5% at Rs152 bn, total debtors (including deferred debtors) have gone up from Rs346 bn at the end of FY19 to Rs378bn at the end of 1QFY20.

Outlook

We have cut FY20/FY21E earnings factoring weak 1QFY20 numbers, adverse macro environment (unfavorable payment terms, uncertain account receivables and lower upfront advances). We maintain Hold on the stock with revised TP of Rs56 (13x FY21E).

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