Religare's research report on BHEL
BHEL’s Q3 revenues grew 19% YoY to Rs 63.3bn, of which 79% were from the power segment. EBITDA margins expanded 3,380bps YoY to 3.5% (359bps above RCMLe) led by (a) a 217bps/410bps YoY decline in material/ employee costs and (b) a 2,753bps YoY drop in other operating expenses (Rs 200mn of provisions written back vs. Rs 11.9bn booked in Q3FY16).
OutlookBHEL’s Q3FY17 results (revenue: +19% YoY to Rs 63bn; adj. PAT Rs 935mn) were ahead of estimates on account of faster execution. However, order inflows for Q3/9MFY17 spiraled down 73%/76% YoY to Rs 16.1bn/Rs 66.1bn while the order book slid 10% YoY to Rs 984bn. BHEL expects key orders of Rs 220bn to become executable before FY17-end. At 22x FY19E P/E, the stock is expensive and factors in positives on the regulatory front, execution speed and margins. SELL; Mar’18 TP Rs 100 (Sep’17 TP: Rs 90).
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