Hold BHEL - Emkay

Reco: HOLD
CMP: Rs 274
Target Price: Rs 275

Order cancellation at fore; Retain HOLD

- Orders worth Rs58.5 bn cancelled. 9MFY12 order inflows dismal at 133 bn. Investor concerns strengthened on order backlog quality, revenue & earning visibility.

- Q3FY12 performance meets expectations – (1) Revenue +19% yoy to Rs107 bn (2) EBITDA margins down 360 bps yoy (3) APAT +2% yoy to Rs14.3 bn. Debtors rise sharply by 16% qoq.

- Core business lacks growth triggers amidst multi-fold challenges. Forecast order backlog to decline from to Rs134 bn and earnings to decline by 20% in FY14E to Rs21.2.

Maintain BHEL as top AVOID in Emkay ECG universe. Maintain negative bias, though, PER de-rating from 23X to 13X could be floor. Retain HOLD with revised target of Rs275.

Source : Equity Bulls

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