BHEL shares in focus today after Q4 results; what analysts say after weak earnings

Shares of Bharat Heavy Electricals Ltd (BHEL) will be in focus during the trading session on Wednesday, after the state-run power generation equipment manufacturer reported a muted set of numbers in the March 2024 quarter, below the street's estimates. However, the company also announced a dividend for the shareholders.

BHEL reported a consolidated net profit of Rs 489.62 crore for the January-March 2024 quarter, falling 25.6 per cent on a year-on-year (YoY) basis, higher expenses by the company The PSU player clocked a bottomline of Rs 658.02 crore reported during the same period last year. However, its bottomline grew manifold sequentially (QoQ) from Rs 60.31 crore in December 2023 quarter.

The PSU firm's revenue from operations rose marginally by 0.4 per cent to Rs 8,260.25 crore in March 2024 quarter as against Rs 8,227.99 crore in the year-ago period. Revenue was up 50 per cent on a quarterly basis. Ebitda for the quarter tumbled 22.65 per cent to Rs 892.78 crore in the Q4FY24, compared to Rs 1,160.60 crore in the year ago period.

BHEL accounts for 53 per cent of the country's total installed power generation capacity. The company board recommended a dividend of Rs 0.25 per equity share of Rs 2 face value for the financial year 2023-24, subject to approval from the shareholders and regulators.

However, the analysts are not impressed by the Q4 numbers of BHEL. Amit Anawani, Research Analyst, Prabhudas Lilladher said that standalone revenue was flattish YoY as healthy growth in Industry segment sales was offset by the decline in Power segment sales.

"Ebitda margin contracted by 394 basis points YoY to 8.8 per cent owing to a sharp jump in other expenses. PBT fell 31.9 per cent YoY, below estimates, while PAT declined 25 per cent YoY due to the weak operating performance which was partially offset by higher other income and a lower effective tax rate. The stock trades at 85.5 times and 32.0 times FY25 and 26E earnings" he said.

Shares of Bharat Heavy Electricals Ltd settled at Rs 319.20 on Tuesday, rising 2.95 per cent, with a total market capitalization of more than Rs 1.11 lakh crore. BHEL has delivered a return of more than 315 per cent from its 52-week low at Rs 77.30, hit about a year ago.

Nuvama Institutional Equities had in July 2023 upgraded BHEL to a ‘buy’ when the stock price was Rs 94 given the power balance had already shifted towards a deficit scenario from May 2023, with peak deficits visible from August-September 2023.

"We estimate EPS CAGR would be 88 per cent-plus over FY25–27E, despite conservative assumptions 70 per cent market share in thermal power; delayed execution pickup by FY26; higher provisions and other opex; and slow OPM ramp-up versus 18–20 per cent achieved during peak. We value BHEL at 30 times March 27E EPS, implying a revised target price of Rs 400," Nuvama said.

Technical analysts are positive on the counter too and suggest investors to long the counter for further upside. Pravesh Gour, Senior Technical Analyst, Swastika Investmart said that BHEL is having a very bullish chart, as it is forming higher highs and higher lows for formation on the daily chart.

"The overall structure of the counter looks lucrative, as it is trading above all its important moving averages. An investor can take a position at the current level of Rs 319 with a stop loss of Rs. 285 for the target of Rs 374 in the near term. MACD is supporting the current strength, whereas the momentum indicator RSI is also positively poised," Gour said.

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