Bharat Heavy Electricals Ltd. share price target

Bharat Heavy Electricals (BHEL)'s 2QFY21 earnings were disappointing as revenue came in 27% below our estimates. Higher fixed cost dented operating performance, with operating level loss attributable to underabsorption of costs. The company is yet to show any significant improvement in pending receivables, with total debtors at INR349b in 1HFY21 (v/s ~INR360b at end-FY20). In spite of the company's ongoing efforts, we expect the receivables position to remain elevated in the near future. Order inflows remained weak, with 50% YoY decline in 2QFY21. We now expect BHEL to report operating-level loss in FY21E. While orders...

Deferral of key projects impacts order inflows During Q1FY21, order inflow was at | 1485 crore, down 62% YoY, (| 982 crore from power segment, | 442 crore from industrial segment, | 61 crore from exports segment). Bhel's order backlog as on Q1FY21 was at | 108126 crore (| 86603 crore in power, | 13447 crore in industrial, | 8073 crore in exports). Of total order backlog, executable orders were at 87967 crore. It is favourably placed in orders like Talcher power plant. However, few power projects including Lara, Singrauli and Pench power plants are getting...

BHEL secured orders worth Rs14.9bn in 1QFY21 translating into an order backlog of Rs1.1trn (5.7x trailing revenues). BHEL reported weak performance for the quarter wherein both segments Power/Industry revenue de-grew by 68%15% YoY. During the quarter order inflows de-grew by 62% YoY led by delay in ordering activity, deferment due to Covid-19 pandemic and overall stress in power sector. Order backlog stands at Rs1.08trn, flat YoY (executable OB ~Rs880bn) providing revenue...

We now expect BHEL to report loss in FY21E and have also reduced our FY22E earnings estimate by 21% to factor poor execution and a weak ordering environment. EBIT loss stood at INR2.5b (v/s profit of INR349m Order book (OB) was flat YoY at INR1081b, with OB/rev at 5.7x. Total receivables remain elevated at ~INR360b, of which 12% are from the private sector, 48% from state entities, 33% from the center, and 7% pertain cost at ~25% of sales. In FY20, working capital deteriorated to 99% of sales from 65% in FY19 due to higher inventory, slow movement in receivables, and poor We now expect BHEL to report loss in FY21E and have also reduced our FY22E earnings estimate by 21% to factor poor execution and a weak ordering environment. While the company has received EoIs from three major OEMs regarding its ongoing diversification drive, we believe any material financial impact is still some time away.

BHEL, a government owned entity, is India's largest engineering company and dominates the supply of equipment for power plants in India. Key products include gas turbines, generators, thermal sets, diesel shunters,...

Order inflows impacted by deferral of key projects During Q4FY20, order inflow came in at | 6405 crore, down 3.4% YoY, (| 3031 crore from power segment, | 3301 crore from industrial segment, | 73 crore from exports segment). For FY20, order inflows were at | 23547 crore, down 1%, YoY. Bhel's order backlog as on Q4FY20 was at | 108443 crore. It is favourably placed in orders like Talcher power plant. However, few projects in the power sector including Lara, Singrauli, Pench power plants are getting deferred for awarding/ tendering and likely to get awarded...

EBITDA loss stood at INR5.6b (v/s profit of INR14b last year) due to lower absorption of fixed cost. EBIT loss stood at INR3.7b (v/s revenue was down 7% YoY to INR55b. Total receivables remain elevated at INR365b, of which 12% is from the private sector, 47% is from state entities, 34% is from the Center and 7% is BHEL continues to struggle on account of cost at ~25% of sales. In FY20, working capital deteriorated to 99% of sales from 65% in FY19 on account of higher inventories, slow movement in receivables We have cut our FY21E/FY22E earnings estimates by 46%/17% to account for the poor execution and weak ordering environment. EBIT loss stood at revenue was down 36% YoY to INR150b. EBIT loss stood at INR3.7b (v/s profit of INR349m YoY). BHEL continues to struggle on account of (a) the weak ordering environment in the power sector, (b) high receivables of INR365b, and (c) high employee cost at ~25% of sales in FY20.

BHEL reported weak performance for the quarter where both segments Power/Industry revenue de-grew by 61%18% YoY. During the quarter, order inflows de-grew by 5% YoY led by muted ordering activity, deferment due to Covid-19 Pandemic and overall stress in power sector. Current order backlog stands at Rs1.08trn that provides revenue visibility for the future. Despite...

BHEL, a government owned entity, is India's largest engineering company and dominates the supply of equipment for power plants in India. Key products include gas turbines, generators, thermal sets, diesel shunters,...

Order inflows impacted by delays in project finalisation During Q3FY20, order inflow came in at | 5950 crore, down 22.7% YoY, (| 3240 crore from power segment, | 2230 crore from industrial segment, | 480 crore from exports segment) while 9MFY20 inflows stands at | 17000 crore. Bhel's order backlog as on Q3FY20 was at | 107654 crore, of which executable order book is ~ | 87495 crore. Bhel is favourably placed in orders worth ~| 13000 crore (Talcher plant- | 6300 crore, FGD- | 4200 crore, industry segment- | 900 crore). However, few projects in power sector...