Hold BHEL; target of Rs 47: Prabhudas Lilladher

February 13
21:25 2020

Prabhudas Lilladher’s research report on BHEL

BHEL’s 3QFY20 results were lower than our and consensus estimates. Execution continues to be subdued with ~23% YoY decline in revenues, led by de-growth in both Power and Industry segment. Order inflow de-grew by 23% YoY due to muted ordering activity and overall stress in power sector. Current order backlog stands at Rs1.1trn and BHEL is L1 orders worth Rs130bn. While collectable debtors have gone down by ~10% to ~Rs143bn, total debtors (including deferred debtors) continues to be at elevated levels of Rs380bn as on 3QFY20. The company emphasized on strong focus on cash collection and execution going ahead. We have cut FY20/FY21E earnings by 15%/3% factoring weak 9MFY20 numbers and adverse macro environment (unfavorable payment terms, doubtful receivables and lower upfront advances).


The stock is currently trading at 25.5/9.9x FY20/21E. We remain structurally negative on the stock given its ballooning debt levels, concern receivables and weak fundamentals. Thus, we maintain Hold rating on the stock with revised TP of Rs47 (12x FY21E).

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