PEOPLE CLOSE TO ME KNOW THAT THIS STOCK HAS BECOME AN INDICATOR WHEN IT FELL FROM 300 ABOVE LEVELS. THE JOURNEY IS RUDE FOR THE INVESTORS BUT IT IS A GOOD INDICATOR FOR THE ANALYSTS TO STUDY THE MARKET STRENGTH AND THE INTRINSIC STRENGTH OF OUR ECONOMY. THE 298 LEVEL IS THE BEST PLACE TO JUDGE THE DIRECTION. NOW THIS STOCK HAS FALLEN MORE THAN 30% STILL ....TO GO.
THE STOCK HAS BOTTOM SUPPORT AT 180 LEVEL AND 168 LEVEL. I LOOK FOR THE UPWARD VIGOR IN THE STOCK. THE NUCLEAR POWER DRIVE WILL COME AS A NEXT WAVE OF INVESTMENT ATTRACTION WILL BOOST THE PROSPECTS OF THE COMPANY. AS OF NOW IT HAS TO TRADE ABOVE 230 LEVEL TO CONSIDER FOR A BUYING.....
THE STOCK HAS BOTTOM SUPPORT AT 180 LEVEL AND 168 LEVEL. I LOOK FOR THE UPWARD VIGOR IN THE STOCK. THE NUCLEAR POWER DRIVE WILL COME AS A NEXT WAVE OF INVESTMENT ATTRACTION WILL BOOST THE PROSPECTS OF THE COMPANY. AS OF NOW IT HAS TO TRADE ABOVE 230 LEVEL TO CONSIDER FOR A BUYING.....
| 'More downside for BHEL' | ||||||||||||||||||||||||||||||||||||||||
| Due to uncertainties surrounding the power sector, analysts expect project delays and cancellation of equipment orders, leading to earnings pressure for the firm | ||||||||||||||||||||||||||||||||||||||||
| Jitendra Kumar Gupta / Mumbai Sep 11, 2012, 00:45 IST
Bharat Heavy Electricals Ltd (BHEL), key beneficiary of an upturn in the power sector, is now in the news due to headwinds facing the sector, including delay in implementation of existing and new projects, lack of clarity over fuel supply, etc. These events have not only hit demand for power equipment but threaten cancellation of existing orders.
This is also why analysts expect a decline in the company’s earnings over the next two years and, consequently, have downgraded the stock, already down 15 per cent to Rs 198 in the past two weeks. In the worst case scenario, Macquarie Capital Securities India puts the stock’s value at Rs 100. Though other analysts might not agree to such low valuations, a few term BHEL a ‘potential value trap’. The probability of such a scenario increases if the concerns highlighted recently become reality, thereby impacting earnings in the coming years.
In simpler words, though on the basis of the current financial year’s earnings the stock might look reasonably valued at 8.5 times, if one considers the potential negative impact on earnings over the next two years, the valuations might not look as attractive.
“With the prospect of earnings declining another 50 per cent from FY13 estimated levels, the stock’s current price could be at 20 times FY15 worst-case earnings. We would stay clear of BHEL until there’s concrete evidence of a turnaround in thermal generation award activity,” says Inderjeet Singh Bhatia, who tracks the company at Macquarie Capital. The brokerage on September 6 came out with an ‘Underperform’ report on BHEL, with a 12-month price target of Rs 186. Besides earnings, analysts also see a possibility of a 1,500-basis points reduction in RoE (return on equity), to about 15 per cent over the next two years. Visibility concerns Back in 2010 and 2011, BHEL had an order book to sales ratio of over four times (on an average). This is now around 2.9. Even the current order book (partly) of the company at Rs 1,39,000 crore is at risk, believe analysts. This, they believe, is consequent to about 35 per cent of BHEL’s orders being accounted by private sector clients. “We estimate a total of 28 per cent of the existing order backlog (as of June) is at risk of cancellation or deferment due to either non-availability of coal linkage or cancellation of existing coal mines or linkage due to the coal allocation scam,” says Amar Kedia of Nomura Equity, in a note on the company. Apart from cancellation risk, there is a risk of delay in projects. “With 46,000 Mw of power capacity struggling for long-term fuel supply, the pace of project execution would be delayed. This will result in a slower pace of project executions across the existing order book. We do not expect pick-up in ordering activity in FY13, considering the macro issues related to fuel supply,” says Rabindra Nath Nayak, lead research analyst, tracking the power sector at SBICAP Securities.http://www.businessstandard.com/india/news//more-downside-for-bhel//486013/ | ||||||||||||||||||||||||||||||||||||||||
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