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Reduce BHEL, target of Rs 1303: Angel Broking

Posted on: April 8th, 2009 and is filed under Brokerage Recommendations.

Angel Broking has downgraded its rating on Bharat Heavy Electricals from neutral to reduce with a target price of Rs 1,303 in its April 6, 2009 research report. “Bharat Heavy Electricals (BHEL) posted strong Top-line growth of 28.5% yoy to Rs 27,505 crore (Rs 21,401 crore) for FY2009, which was in line with our expectations.

The company witnessed strong execution during 4QFY2009, with Gross Sales growing 32.5% yoy to Rs 10,550 crore (Rs 7,960 crore). With BHEL’s Order book swelling to historic highs, we believe going ahead Order execution would emerge as a key challenge area for the company. Though the company has managed the execution reasonably well in FY2009, nonetheless several projects involving BHEL are already running behind schedule. In addition, the company also faces a diverse set of challenges emanating both from the weak economic environment and increasing competition in the Sector, which could limit further upside in the stock.”

“In wake of the new MoU signed and inputs gathered during the recent concall, we are marginally pruning our EPS estimates for FY2010E by 5.6% to Rs 81.4. We assign a target PE multiple of 16x FY2010E EPS for the company arriving at a target price of Rs 1,303. Given the overall concerns and expensive valuations, we downgrade our rating from Neutral to Reduce on the stock,” says Angel Broking’s research report.

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