BHEL Review: What are brokerages saying?

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BHEL Review

Bharat Heavy Electricals (BHEL) posted a marginal 2% increase in FY12 third-quarter net profit at Rs 1,430 crore versus Rs 1,403 crore in the corresponding period last year.

Bharat Heavy Electricals, India's largest power-equipment manufacturer by sales, said net sales for the October-December period rose 19% (YoY) to Rs 10,550 crore from Rs 8850 crore a year earlier.

The revenues were in line with market estimates, however, profits missed expectations.

Margin declined at 17.9% in the quarter ended December FY12 versus 21.45% in the corresponding quarter of last fiscal. Also, operating profits tumbled 3% (YoY) at Rs 1888 crore versus Rs 1942 crore last year.

According to the company, margins took a hit in the quarter under review on the back of high freight rates, insurance and sub-contracting expenses.

Further, “orders worth Rs 58.5 billion have been cancelled by private customers due to lack of progress on the clearances front during this quarter. Thus, the order book degrew 7% (YoY) at Rs 1.46 lakh crore.”

Total order book stood at Rs 1.47 lakh crore versus Rs 1.61 lakh crore in the corresponding quarter last fiscal. “Working capital has increased significantly due to lack of fresh orders, and there’s no commentary on guidance as DRHP has already been filed,” the company elaborated.

A host of brokerages have downgraded the stock post the dismal performance on the earnings front. Here’s what major investment banks are betting on:

Jefferies

Maintains underperform; target of Rs 225

HSBC

Maintains neutral; target cut to Rs 295 versus Rs 318

Stanchart

Maintains underperform; target cut to Rs 253 versus Rs 280

Barclays

Maintains underweight; target cut to Rs 225 versus Rs 230