February 08, 2017 / 13:54 IST
Motilal Oswal's research report on BHEL Sales increased 18.7% YoY to INR 63.2b, exceeding our estimate INR 60.5b. Power segment sales grew by 18% YoY to INR 50.9b and Industry segment sales by 20% YoY to INR 13.7b. Improved pace of execution was driven by management’s focus on expediting project completion. EBITDA stood at INR 2.2b, with margin at 3.5% (est. of -12.4%).
OutlookWe raise estimates for FY17/FY18 by 40%/4% to factor in higher-than-estimated provision reversals and lower SG&A costs. We maintain our Sell rating, given a) likelihood of execution remaining constrained (44% of order book is slow moving), b) weak order pipeline for FY17/FY18 and c) continued pressure on margins due to execution of JDU projects and intense competition. We revise up our TP to INR 115 (P/E of 20x FY19E, earlier INR 110).
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