HSBC maintains overweight rating on BHEL
HSBC maintains ‘overweight’ rating on Bharat Heavy Electricals (BHEL) with a target price of Rs 2,300.
BHEL
RESEARCH: HSBC
RATING: OVERWEIGHT
CMP: RS 1,654.90
HSBC maintains ���overweight��� rating on Bharat Heavy Electricals (BHEL) with a target price of Rs 2,300. The recent correction in the stock price provides a buying opportunity as fundamentals remain intact. The share price does not reflect the growth momentum of the domestic power equipment market.
India aims to add 78 GW of capacity in the 11th Five-Year Plan, and BHEL, with a 65% market share, is its main beneficiary. Strong new order inflow of Rs 14,500 crore resulted in a Rs 95,000-crore order backlog. The gas turbine and railway locomotive businesses are additional growth drivers.
BHEL has formed three JVs with state utilities to set up supercritical projects. HSBC maintains its revenue growth estimate of 27% for FY09E, given that BHEL has expanded its capacity and has been able to address its execution-related issues. But higher commodity prices and staff cost provisioning may impact the company���s profitability, thus affecting EBITDA margins by 200 bps in FY09E and FY10E, lowering profit growth by 8-10%. HSBC expects Bhel to report EPS of Rs 79.3 and Rs 103.1 in FY09E and FY10E, respectively.
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Disclaimer: Investor���s Guide does not accept responsibility for consequences of financial decisions taken by readers on the basis of information provided herein. The aim is to provide a reasonably accurate picture of financial and related opportunities based on information available with us. The Times of India Group has invested in several companies; a list of the names of some of the investee companies can be viewed at http://www.privatetreaties.com
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