INSUBCONTINENT EXCLUSIVE:
Mumbai: Morgan Stanley has slashed the target price on Bharat Heavy Electricals to Rs 37 from Rs 46, down almost 20 per cent, while
macro condition is considerably weaker than past cycles and BHEL may have to reinvent its business model, said Morgan Stanley.
The brokerage
believes that valuation, at 0.5 times FY21 price-to book, continues to be cheap owing to the multiple headwinds and return on equity
continues to be uninspiring.
Shares of BHEL ended up 0.9 per cent at Rs 44.85 on Friday
The stock is down 38.6 per cent for the calendar year 2019, underperforming the benchmark Sensex, which is up 15.6 per cent so far this
year.
In the bull case scenario, the brokerage sees BHEL shares at Rs 66 in a year, assuming a better ordering outlook, stronger revenue
growth in the power business, healthier margins and improvement in the working capital.
A significant slowdown in thermal orders, higher
competitive intensity eating into the margins, and deteriorating receivables position can lead to stock de-rating, said Morgan Stanley
