INSUBCONTINENT EXCLUSIVE:
Edelweiss Securities has given a reduce recommendation on Bharat Heavy Electricals (BHEL) with a target price of Rs 60.
Shares of BHEL
traded at Rs 74.8 around 1:50 pm on 26 June, 2019
The brokerage has set a one-year horizon for the stock to hit the target price
"We believe challenges pertaining to thermal power equipment market are unlikely to be resolved quickly, which would limit cash flow or
Besides, taking cognisance of a more steady profit and loss statement since 2017, we are changing the valuation methodology from DCF to
P/E," the brokerage added
As per the brokerage, displacement from renewable energy (RE) will limit thermal ordering to 6-7GW (25-30 per cent of installed base) even
in case of 6 per cent power demand growth for the next seven years
Setting up thermal capacity by central utilities to meet peak demand will be less profitable
The brokerage expects BHEL to garner an additional Rs 10,000 crore worth of orders over the next three years from clean air technologies
(Rs 7,500 crore in order book)
BHEL is also targeting opportunities in transportation with Kawasaki
recovery of balance sheet and pick-up in thermal ordering seem far away.