BHEL to remain under pressure on margins: P Phani Sekhar

In a chat with ET Now, P Phani Sekhar, Fund Manager-PMS, Angel Broking, shared his views on BHEL.

ET Now: What did you make of BHEL’s earnings yesterday and when do you think the company would manage to actually post a turnaround?

P Phani Sekhar: That was expected. Very honestly, we think BHEL will be off investors’ radar for quite sometime to come because there is a structural de-rating of this entire sector as there is overcapacity in the BTG segments. You have been seeing what kind of prices are being quoted by newer players who are desperate and then there is a Chinese competition. BHEL, which was commanding 65% market share and has built capacity, will suddenly find that it will be unable to serve more than 40% market share. It means there will be pressure on order book that we have seen yesterday. There will be pressure on margins which we are likely to see in the days to come.

Earnings for BHEL over the next three years had already peaked last year. So over the next 2 to 3 years, you are likely to see BHEL struggling to hit the same earnings which it hit last year. So BHEL de-rating in the form of PE multiple is more or less in the price. What might follow is a very long time wise correction. So the stock might not meaningfully got down from these levels but it might not go up frustrating a lot of people.