Buy BHEL, target of Rs 1585: IIFL
IIFL has recommended a buy rating on Bharat Heavy Electricals with a target price of Rs 1,585 in its April 06, 2009 research report.
“Higher-than-expected 34% YoY growth in 4Q gross revenues was reassuring after the execution slip in 3Q. However, our fears of a muted guidance for FY10 revenues came true. The 16.3% YoY growth in gross revenues implied by MoU target of Rs 320 billion under ‘Excellent’ rating is below our estimate as well as consensus. The muted guidance reflects constraints on accelerated execution, as was evident during our recent visit to a project site. We cut our FY10 and FY11 earnings estimates by 5% on lower revenue estimates. Order coverage ratio of 4.6x provides unmatched earnings visibility in the Indian capital-goods universe, but valuations, at PE of 18.7x on FY10ii and 15.5x on FY11ii, leave little room for slippages.”
“Bharat Heavy Electricals’s 4Q gross revenue growth of 34% YoY helped the company beat the FY09 MoU targets by 1.8%. However, EBITDA margin likely contracted by 300bps in 4Q, against our estimate of 240bps contraction. BUY”, target price of Rs 1,585,” says IIFL’s research report.
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