Motilal Oswal - Bharat Heavy Electricals Limited (BHEL) MOSL: BHEL (Neutral)-Execution disappointing; Outlook weakening further

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Motilal Oswal

EUR 120.00 For Business Accounts Only

MOSL: BHEL (Neutral)-Execution disappointing; Outlook weakening further

BHEL: Execution disappointing; Outlook weakening further

(BHEL IN, Mkt Cap USD1.9b, CMP INR39, TP INR40, 4% Upside, Neutral)

Slow-moving orders cast doubts over execution

BHEL’s 3QFY20 earnings continue to disappoint due to 23% YoY revenue decline as its two key projects are on hold (Yadadri and Udangudi). Due to forex gains and reversal of provisions, better margins are offsetting part of the revenue miss. But, operating performance was below expectations. BHEL’s management has refrained from providing any revenue guidance as its focus has shifted to cash-flow management; the company has INR380b of pending receivables, which has hardly moved over the last few years.
We cut our earnings estimates by 9-13% over FY20-22E to account for poor execution and the weak ordering environment. While orders are few to come by, the pricing environment continues to be very competitive, limiting scope for margin expansion. Maintain Neutral with a lower TP of INR40.

12/02/2020 10 EN

Underlying

Bharat Heavy Electricals Limited

Bharat Heavy Electricals is an integrated power plant equipment manufacturer in India engaged in the design, engineering, manufacture, construction, testing, commissioning and servicing of a wide range of products and services for the core sectors of the economy, viz. Power, Transmission, Industry, Transportation (Railway), Renewable Energy, Oil & Gas and Defense with over 180 products offerings to meet the needs of these sectors. Co. operates through Power and Industry segments.

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INE257A01026 National Stock Exchange of India India

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Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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MOSL: BHEL (Neutral)-Execution disappointing; Outlook weakening further

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MOSL : SHOPPERS STOP: Ticking the right boxes

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