Hold Bhel; target of Rs 60: ICICI Direct

ICICI Direct's research report on Bhel

Bhel’s Q1FY20 revenues came in at Rs 4531.7 crore, down 23.7% YoY (vs. our estimate of Rs 6376.1 crore) impacted by execution headwinds due to land constraints, clearances and local agitations. On the segmental front, power segment revenues declined 24.7% to Rs 3491.5 crore YoY whereas industrial segment revenues declined 20.4% to 918.8 crore YoY. It registered an EBITDA loss at Rs 266.7 crore (vs. our estimate of Rs 327.4 crore), owing to reduced revenues. It posted a net loss of Rs 216.2 crore (vs. our estimated PAT of Rs 153.6 crore), owing mainly to execution headwinds, increased interest cost, lower other income. For Q1FY20, order inflow came in at Rs 3892 crore while order backlog was at Rs 107806 crore.

Outlook

We revise our fair value to Rs 60 (16x FY21EPS) and maintain HOLD rating. Key risk: Elongated execution headwinds, concerning long term thermal power sector outlook.