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BHEL rated underperform by Jefferies as results were well below expectations
Posted on 14th November 2017
BHEL’s 2QFY18 results came in well below expectations with a reported EBITDA loss. Company would have reported a loss if not for the 98% y-o-y rise in other income to Rs 6 billion. Other expenses rose 36% y-o-y (ex of Rs 2.5 billion wage revision expense) on a 4% y-o-y revenue decline. Management indicated there is no one-off expense in the same. Given no visibility on material reduction in debtors or market pie expansion, we maintain Underperform. Giving benefit of revenue recovery due to Yadadri BHEL’s revenues declined 4% y-o-y to Rs 63 billion v/s expectations of a 7% y-o-y rise. Management didn’t really highlight GST implementation as a reason for revenue deferment, but discussed general revenue recognition milestones impacting the same. In October, 2017, BHEL announced that execution has begun on the Rs 204 billion, 5×800 MW, Yadadri project from the Telangana government. We have assumed revenue recovery is driven by execution on this earlier slow-moving project and maintain our FY18E-19E estimates for now.

Order book down 6% y-o-y BHEL’s order flow declined 6% y-o-y to Rs 19 billion, with limited orders from export markets. Management maintained that the industry pipeline is around 10 GW, and the company is L-1 on orders to the tune of Rs 260 billion. This mainly includes NTPC’s 2400 MW Patratu plant, 660 MW Panki plant and 660 MW Bhusawal plant. These orders are needed to meet our annual expectations of Rs 353 billion. Order book declined y-o-y, which does raise concerns on medium-term revenue visibility.

Gross margin improvement offset by other expenses Gross margins rose 260 bps y-o-y in FY17 to 40.5%. 2QFY18 is 38.9%, with management highlighting it is likely to stabilise at these levels. However, sharp 36% y-o-y rise in other expenses is offsetting this impact at the EBITDA level. We have 50-100 bps y-o-y gross margin improvement in FY18E and FY19E.

We do not expect a material upside to this from current levels. However, if other expenses is not contained in 2HFY18E, it could lead to downside risk to our estimates in FY18E-19E. Valuation/Risks We believe BHEL’s business model remains flawed as overcapacity will mean sub-10% medium-term ROE. Maintain Underperform, with a DCF based TP of Rs 67. Upside risks: 1) BHEL cutting fixed costs aggressively; and 2) pricing improves.

Related Companies: BHEL   

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Markets stay under pressure, Sensex below 35,400-mark
Posted on 22nd June 2018
NEW DELHI: The benchmark BSE Sensex got off to a lower start today, tracking a sell-off in global markets amid escalating trade war worries.

The 30-share index, which had lost 114.94 points in the previous session, was down 53 points at 35,379.65 at 10.07 am. Capital goods, realty, infrastructure, power, healthcare and metal stocks showed weakness, falling by up to 0.35 per cent.


COAI favours 5G auctions only around second half of 2019
Posted on 22nd June 2018
New Delhi, Jun 22 () Telecom industry body COAI has said auction of spectrum for 5G services should happen only around the second half of 2019 as it would offer telcos better visibility into market dynamics and potential revenue streams of the next-generation mobile services.

Vodafone-Idea merger to be approved soon
Posted on 22nd June 2018
The Department of Telecommunications (DoT) is expected to clear the merger of Vodafone India and Idea Cellular early next week. Both the companies, however, may have to pay one-time-spectrum-charges (OTSC) dues, though these are under challenge in the court. The DoT is expected to ask Vodafone for Rs 5,650 crore – or a bank guarantee – and Idea for Rs 2,113 crore for its OTSC dues.

Bank of Baroda puts Rs 3k-cr exposure to NCLT accounts on sale
Posted on 22nd June 2018
Over the last week, Bank of Baroda (BoB) has put on sale non-performing assets (NPAs) worth Rs 7,655 crore, including its exposures to some accounts named in the Reserve Bank of India’s (RBI) two lists of bankruptcy cases, such as Essar Steel, Bhushan Power & Steel, Soma Enterprise and Visa Steel. BoB’s aggregate exposure to these accounts is Rs 3,004 crore.

RBI sets deadline for ATM upgrade
Posted on 22nd June 2018
Irked by the slow progress made by banks in addressing security concerns around automated teller machines (ATMs), the Reserve Bank of India (RBI) on Thursday set certain compliance timelines. RBI added that any deficiency in timely and effective compliance with the instructions may invite “appropriate supervisory enforcement action”.

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