“BHEL’s results were weak on execution and working capital, making it a net debt company. With ordering at 3X of revenues and potentially peaked out, the focus would shift to the pace of execution and margin improvement. We see impediments to both on account of high dependence of vendors beyond BTG work. Execution is also key to working capital reduction given revised terms linked more to milestones,” said a report by Kotak Institutional Equities.
The brokerage maintained a ‘sell’ call on the stock while revising the target to Rs 75.
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Despite posting weak results, other brokerage firms remain positive on the company’s future outlook. Here’s what they have to say:ICICI SecuritiesICICI Securities said that the year saw a revival in thermal orders in India, with the country laying out bids for a total of 10GW, and BHEL had a 100% strike rate in the bids. It is expected that India will seek bids for the ordering of 10GW again over the next few years, leading to a healthy OI outlook. However, BHEL’s execution and gross margins were subdued, as the company is still executing legacy orders. The brokerage stated that it expects the impact of the legacy orders to wear out and the new orders to start contributing meaningfully H2FY25 onwards. They have reiterated a ‘buy’ view on the stock with a target price of Rs 370.
Nuvama
Given 25GW of thermal TAM spread over FY25–26E versus 9.6GW in FY24, implies BHEL’s thermal OI of 8.4GW/year at 70% market share. Nuvama has revised FY25E/26E EPS by (0.4)/7% given execution of low OPM legacy orders till FY25 and pickup in new order execution from FY26E.
Nuvama retained a ‘buy’ rating with a target price of Rs 400 for BHEL.
Antique Stock Broking
The brokerage firm stated that BHEL missed the estimates on the operational front but the business outlook remains promising and the company is likely to witness a meaningful reversal in its ordering cycle over the next 3-4 years. Antique also believes that the earnings are anticipated to climb up multi-fold over FY 24-26.
With this, the brokerage maintained its buy rating on the stock with a target price of Rs 360.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)