IDFC securities has maintained an Underperformer rating for BHEL. The reasons for same are as appended below:
BHEL, L&T and BGR were the three qualified bidders for the boiler component of NTPC’s 660MW x 11 bulk tender. BHEL emerged L2 with a readout bid of Rs 16 million/MW. BHEL would be awarded four units of 660MW each (2640MW) provided it matches BGR’s bid. Order size for BHEL is likely to be Rs 3,700 crore. BHEL had bagged orders worth 2520MW from the power sector during 9MFY12, and the current order wins would take its power sector order inflow to 5160MW in FY12 so far. BHEL’s order book stood at Rs 1.46 trillion as of December 2011. Analysts believe the current bids are clearly aggressive and would drive a margin dilution for BHEL. Analysts expect a muted 5.6 per cent earnings growth over FY11-13, with 15.1 per cent earnings growth in FY12 and 3.1 per cent earnings decline in FY13. Further, outlook on order flows remain very weak, which also impairs earnings visibility beyond FY13.