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The share price of the firm has declined by 18 percent intraday on June 14 after Bharat Heavy Electricals Limited (BHEL) announced its March quarter earnings
In the March 2021 quarter, the state-owned engineering company’s consolidated net loss narrowed to ₹1,036.32 mainly on the back of higher revenues.
According to a Bombay Sock Exchange (BSE) filing, BHEL’s consolidated loss stood at ₹1,532.18 crore in the March 2020 quarter.
During January-March 2021, the company’s total income increased to ₹7,245.16 crore from ₹5,166.64 crore in the year ago period.
The recommendations by analysts post BHEL’s March quarter results suggest that it could be the beginning of a sharper fall in the stock.
Edelweiss Group, a Mumbai-based investment and financial services company said, “In our view, market excitement about BHEL’s recent rally (two times in a month) overlooked its conventional business i.e. sticky balance sheets and costs, and underutilization. With pending clarity on scalability and transition to new revenue streams, we retain ‘reduce’ rating with a revised target of ₹29.”
As per CLSA Ltd., the Q4 results were terrible and weak in its execution with order backlog falling 6 percent to ₹1,02,100 crore. It pegged the stock value at ₹40.
Motilal Oswal Securities stated, “The company is yet to show a significant improvement in pending receivables, with total debtors at ₹31,300 crore in FY21 against ₹34,800 crore in 9MFY21. Order inflows remained weak, with a 31 percent YoY decline in Q4 and 43 percent fall in FY21.” It estimates FY22 to be the loss-making year for the company and cuts it FY23 EPS estimate for the PSU by 36 percent. The price target is of ₹40.
Nirmal Bang added that BHEL’s share price had almost doubled year to date and the stock is presently trading at 24 times FY23 EPS.
Kotak Institutional Equities has set a price target of ₹34 while highlighting the company’s weak results on execution, gross margin and working capital.