Emkay Research has maintained its buy rating on Bharat Heavy Electricals with a price target of Rs 2330 in its May 27, 2008 research report. "BHEL declared its Q4FY2008 results with net sales of Rs 72 billion and net profit at Rs 11.1 billion. However the same is below our expectation. The net sales growth of barely 4.1% clearly shows execution problems with the company. The order book position is at Rs 85.5 billion which was ahead of expectations."
"In order to factor in a lower earnings growth we are downgrading our price target to Rs 2330, which is based on 22.5X its FY2010 earnings. At CMP of Rs 1655, BHEL is trading at 16X its FY2010 earnings and 10.4X its FY2010 EBIDTA, which is near the lower range of its trading band. We believe that BHEL is taking steps in right direction to address issue of supercritical order, increasing pace of execution and expanding capacity. Key positive triggers are negotiated orders for 800MW supercritical units from NTPC, visibility on execution of projects in JVs like that with TNEB for supercritical projects and award of 800X2 MW supercritical units from Krishnapatnam project. Faster execution of delayed order shall also improve near-term earnings growth. Maintain BUY," says Emkay's research report.
