UBS puts 'buy' on BHEL
UBS upgrades the rating of BHEL from `Sell’ to `Buy’ and raises the price target to Rs 2,800.
By ET Bureau |
RESEARCH: UBS
RATING: BUY
CMP: Rs 2416
UBS upgrades the rating of BHEL from `Sell’ to `Buy’ and raises the price target to Rs 2,800. Excluding the impact of provisions related to wage revisions during FY08-10, BHEL appears to have a significant operating leverage, as suggested by the decline in its staff costs and other expenses during FY04-08. UBS thinks the structural decline in orders and lower margins for the private sector are likely to remain a long-term concern.
However, BHEL is trying hard to protect its turf: 1) it has won significant orders from the private sector in FY10; and 2) BHEL has entered into JV/MOU (7,000 MW) with SEBs (state electricity boards) and state generation companies in an attempt to protect its margins and volume. At the price target of Rs 2,800, BHEL would trade at 18x FY12E EPS, which is reasonable.
RATING: BUY
CMP: Rs 2416
UBS upgrades the rating of BHEL from `Sell’ to `Buy’ and raises the price target to Rs 2,800. Excluding the impact of provisions related to wage revisions during FY08-10, BHEL appears to have a significant operating leverage, as suggested by the decline in its staff costs and other expenses during FY04-08. UBS thinks the structural decline in orders and lower margins for the private sector are likely to remain a long-term concern.
However, BHEL is trying hard to protect its turf: 1) it has won significant orders from the private sector in FY10; and 2) BHEL has entered into JV/MOU (7,000 MW) with SEBs (state electricity boards) and state generation companies in an attempt to protect its margins and volume. At the price target of Rs 2,800, BHEL would trade at 18x FY12E EPS, which is reasonable.
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