6 BHEL share price target reports by brokerages below. See what is analyst's view on BHEL share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
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).
BHEL’s 2QFY20 results were lower than our and consensus estimates.Execution continues to be muted with ~9% YoY decline in revenue, mainly in the Power business which declined for third consecutive quarter. However, industry segment recovered on QoQ basis with strong double digit growth, partially cushioned to decline in Power segment. Order inflow revived with 44% YoY growth mainly led by 61% YoY growth in Power segment orders (FGD/Nuclear Projects). Current order backlog stands at Rs1.1 trn and favorably placed in bids worth Rs210 bn. While collectable debtors have gone down by ~12% at Rs140 bn, total debtors (including deferred debtors) continues to be at elevated level of Rs376 bn at the end of 2QFY20. The company emphasized on strong focus on cash collection and execution going ahead. We have cut FY20/FY21E earnings factoring weak 1HFY20 numbers and adverse macro environment (unfavorable payment terms, uncertain account receivables and lower upfront advances). The stock is currently trading at 16/12x FY20/21E. We maintain Hold on the stock with revised TP of Rs60 (13x FY21E).
Further, deferment in award of many tenders (including those where BHEL is L1) continues to affect revenue visibility. Factoring the same, we have cut our earnings estimates for FY20/FY21 by 29%/23% and retained Accumulate rating on BHEL with a revised target price of Rs63 (from Rs81 earlier) based on 15x FY21E earnings.
Outlook & Valuations... BHEL’s robust executable orders (3.6x FY19 revenue) and strategy to diversify orders to non-coal business, technology collaborations for emission control systems and expected pick-up in execution rate gives reasonable revenue visibility, going forward. However, receivables management from major customers will be closely watched. The company is expected to maintain growth momentum with revenue CAGR of 6.0% and PAT CAGR of 14.1% in FY19-21E. We value the stock at a P/E of 15x on FY21E EPS and ascribe a target price of Rs77 and maintain a Hold rating.
Bhel’s robust executable orders (3.6x FY19 revenue) and strategy todiversify orders to non-coal business, technology collaborations for emission control systems and expected pick-up in execution rate gives reasonable revenue visibility, going forward. However, receivables management from major customers will be closely watched. The company is expected to maintain growth momentum with revenue CAGR of 6.0% and PAT CAGR of 14.1% in FY19-21E. We revise our fair value to | 75 (17x FY21EPS) and maintain HOLD rating. However, long term power sector outlook remains key concern.
With a rising preference towards renewable energy generation and transmission loss reduction, we are structurally negative on thermal power capacity addition beyond 10GW per annum in India, clearly insufficient for a much higher installed capacity base of the BTG industry (35GW). With insufficient order placement activity in the industry, 6% RoE and 7% RoCE in FY21E and a high debtor position, we believe BHEL is not out of the woods yet.
The company has restated its FY18 receivables in the reported number and seems to have classified some of it in the "Other Current" and "Other Non-current assets", the overall (addition of receivables and other assets) seems to have slightly increased. Total Debtors (including deferred debtors) have gone up from Rs329 bn at the end of FY18 to Rs346 bn at the end of FY19. The company has signed MoU for revenues of Rs330 bn for FY20 (+12%YoY). While there could be visible earnings growth in the near-term, adverse macro environment (unfavorable payment terms, uncertain account receivables and lower upfront advances) may delay the recovery. We recommend Hold on the stock with TP of Rs77 (13x FY21E).
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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