Target: ₹100
CMP: ₹71.55
Bharat Heavy Electricals’ (BHEL) Q2-FY23 revenue grew 2 per cent YoY to ₹5,200 crore, led by 6.4 per cent growth in power segment to ₹3,800 crore. Industrial segment revenue declined 16 per cent to ₹1,100 crore.
Gross margin contracted 350bps YoY to 29 per cent, impacted by higher commodity costs, leading to an EBITDA loss of ₹240 crore vs a loss of ₹29.20 crorein Q2-FY22. Order intake was strong at ₹12,000 crore. Power order intake was at ₹9,600 crore, which included the 2x 660MW NTPC Talcher EPC order.
Industrial order intake was at ₹2,280 crore (+78%), which ranged across supply of locomotives, propulsion equipment and transmission equipment among others. Orderbook now stands at ₹1.0 lakh crore (4.6x TTM sales).
We expect execution in the industry segment to gather pace due to increasing backlog and the short-cycle nature of orders. However, given that Q2FY23 loss has widened, we adjust our FY23 and FY24 earnings accordingly.
Nevertheless, we keep our FY25E EPS unchanged as execution of the recently-won orders will by then gather pace and boost profitability as well.