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BHEL bags new 'Buy' from UBS with 40% upside; check target, outlook here
Analysts at UBS assigned a target price of ₹340 per share for the stocks, implying an upside of over 40 per cent from the previous (Monday) close.
The company's thermal orders are set to reaccelerate with a potential for bottom-line acceleration, UBS said in a report dated August 4. Further, the government's 80 Gigawatts (Gw) target in new thermal capacity by the financial year 2032 (FY32) implies 35 Gw of orders in FY25-28. "With an 85 per cent market share in FY17-25, we believe BHEL is best positioned."
The heavy electrical equipment maker's competitive positioning in thermal power remains robust, reflecting its leadership in the past three decades, UBS said. The brokerage expects an order inflow of ₹2.1 trillion in FY25-28, driving a 1.6 times growth in the order book by FY28, it added.
The company saw early benefits of execution pickup, UBS said, which drove Ebitda breakeven from FY21 to FY25. "With the increase in capacity utilisation and execution over FY25-28, we expect BHEL to improve gross and Ebitda margins, led by cyclically better product margins and operating leverage."
UBS believe BHEL is well positioned to benefit from the uptick in new thermal projects, which is expected to drive robust revenue and Ebitda CAGRs of 33 per cent and 84 per cent, respectively, over FY25-28. "In our view, the consensus is underestimating BHEL's earnings potential, leaving room for possible earnings upgrades."
"While we think consensus prices in rising orders, it underappreciates bottom-line translation," UBS added. Key risks to UBS's views include delays in execution ramp-up and fewer new order wins.
BHEL share price history
The company rose as much as 2.6 per cent during the day to ₹247.9 per share. The stock pared gains to trade 2.2 per cent higher at ₹247 apiece, compared to a 0.2 per cent advance in Nifty 50 as of 9:30 AM.
Shares of the company rose for the second day and currently trade at 2.3 times the average 30-day trading volume, according to Bloomberg. The counter has risen 8 per cent this year, compared to a 4.3 per cent advance in the benchmark Nifty 50. BHEL has a total market capitalisation of ₹84,057.01 crore.
About BHEL
BHEL is among the leading power plant equipment manufacturers in the country. The company specialises in the design, engineering, manufacturing, installation, testing, commissioning, and servicing of a diverse array of products and services.
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