MF Global lowers price target on BHEL; maintaines ‘Sell’ rating

MUMBAI: MF Global has maintained ‘Sell’ rating on capital goods major BHEL but lowered its price target on worries that the company may not be able to meet its order target due to cancellation of orders.

“BHEL will not meet its order target of Rs 600bn – lack of coal linkages, SEB losses and land acquisition issues would hamper a renewal in order flows. We see FY12 orders dip to Rs 350bn (-40% YoY) and FY13 at Rs 430bn (+22% YoY). Execution would also be hurt as utilities defer putting up capacities (on lack of fuel and backing down by SEB’s) or completely cancel the order as was witnessed in Q312,” the report said.

“The announced FPO by the government (likely in Q412-Q113) would be an additional hang over on the stock price over the next 2 quarters. We reduce our target price to Rs 210 on a cut in our FY13 EPS by 10%. We apply a 9x multiple to FY14 EPS to get our target price and maintain our SELL rating,” the report said.