Prabhudas Lilladher's research report on BHEL
BHEL's 4QFY19 PAT of Rs6.8 bn was 8% higher than our estimate of Rs6.3 bn mainly on account of 80bps YoY improvement in EBITDA margin which was due to lower provisions and other cost saving measures. However, order inflow for the quarter was down 73.8% YoY (-42% YoY for FY19) due to deferment of certain orders in the power sector ahead of elections, taking year end order back log to slightly above Rs1 trn, down 8%YoY. The company is L1 in orders worth Rs250 bn mainly from the power sector. BHEL indicated market potential of around 20GW, out of which 15GW has already been tendered and 5GW is expected to be tendered out in few months. The company has restated its FY18 receivables in the reported number and seems to have classified some of it in the "Other Current" and "Other Non-current assets", the overall (addition of receivables and other assets) seems to have slightly increased. Total Debtors (including deferred debtors) have gone up from Rs329 bn at the end of FY18 to Rs346 bn at the end of FY19.
Outlook
The company has signed MoU for revenues of Rs330 bn for FY20 (+12%YoY). While there could be visible earnings growth in the near-term, adverse macro environment (unfavorable payment terms, uncertain account receivables and lower upfront advances) may delay the recovery. We recommend Hold on the stock with TP of Rs77 (13x FY21E).
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