BHEL share tumbles to 52-week low on poor Q3 results; brokerages revise rating, check target prices

BHEL shares fell as much as 7.13 per cent to hit a 52-week low of Rs 35.80 apiece on BSE in Wednesday’s trade after the company reported a 17 per cent on-year decline in consolidated profit at Rs 162.67 crore for the quarter ended December 31. The company had posted a profit of Rs 196.48 crore in the same quarter last year. Post disappointing results, brokerage companies have given neutral and hold rating to the stock. “Issues that impacted BHEL’s performance in 9MFY20 are expected to persist at least for some more time. There is also no major reduction in receivables as cash flows of its key clients are also weak,” PhilipCapital Institutional Equity said in a research note.

Around 12.30 PM, Bharat Heavy Electricals shares were trading 5.58 per cent lower at Rs 36.40 apiece on BSE. After December quarter earnings, the brokerage company has revised BHEL share’s target price to Rs 42 from Rs 50 earlier, with an upside of 9 per cent. “We believe BHEL’s rerating mainly depends on major reduction in its receivables. We would continue to look out for any trends that might suggest improvement in BHEL’s cash flows. We maintain Neutral with a revised target price of Rs 42 (Rs 50 earlier) based on 10x PE FY21E,” PhilipCapital Institutional Equity said.

BHEL’s sales declined 23.32 per cent to Rs 5,459.24 crore. While the total expenditure declined to Rs 5,608.36 crore in the third quarter of the financial year 2019-20 over Rs 7,293.15 crore in the corresponding period of last year. Brokerage company Motilal Oswal Institutional Equity has cut the earnings estimates. “We cut our earnings estimates by 9-13% over FY20-22E to account for poor execution and the weak ordering environment. Maintain Neutral with a lower TP of Rs 40,” Motilal Oswal Institutional Equity said in a research note.

However, brokerage company JM Financial has also cut BHEL’s growth estimates, maintain its hold rating with a revised target price of Rs 35. “Given weak execution and ballooning working capital, we cut growth estimates for FY20/21. We maintain HOLD at 12x FY22E earnings with a revised TP of Rs 35. Despite weak macros and muted execution in FY20, we optimistically factor a recovery in FY21 and still find limited upside,” JM Financial said in a research note.