Buy BHEL, 30% upside likely, says Antique as it shares target price on PSU stock
BHEL’s earnings may climb multi-fold over FY24–26 supported by strong ordering, improving execution, and the benefits of operating leverage, Antique stock broking said.
- Mar 11, 2024,
- Updated Mar 11, 2024 10:43 AM IST
Antique Stock Broking has revised upward its share price target on Bharat Heavy Electricals Ltd (BHEL) while maintaining its buy rating on the stock. Despite strong execution, it expects BHEL's order book to rise to an all-time high of Rs 2 lakh crore and believes earnings could grow exponentially over the next three years, given strong operating leverage.
With the completion of legacy orders by FY25, Antique expect the new cycle of orders for BHEL to enter the execution phase FY26 onwards and, hence, it increased its FY26 earnings estimates by 13 per cent.
"Given the improved visibility of thermal ordering over the next two years we increase our exit multiple to a PE of 30 times (earlier 26 times) and maintain BUY rating with a revised target price of Rs 299 (earlier Rs 230)," it said.
Antique said BHEL has reported a robust order inflow in 9MFY24 of Rs 36000 crore (up 102 per cent YoY). It has already bagged three large orders such as 3x800 MW NLC Talabira Thermal Power Plant, 1x800 MW ultra-super-critical expansion unit at DCRTPP (Yamuna Nagar, Haryana), and 2x800 MW NTPC Singrauli Super Thermal Power Project Stage-III in the March quarter. These orders are worth Rs 30,000 crore, exluding taxes.
"We had estimated 4 GW of thermal ordering in FY24, while BHEL has already received 6.5 GW of thermal orders to date. We therefore believe the company is expected to witness a meaningful reversal in its ordering cycle over the next 3–4 years, led by both industry (non-power) and power segments. We therefore increase our average annual order inflow estimate from Rs 60000 crore to Rs 70,000 crore," Antique said.
The broking firm said BHEL’s earnings are anticipated to climb up multi-fold over FY24–26 supported by strong ordering, improving execution, and the benefits of operating leverage.
Antique noted that BHEL has been diversifying its business into non-power segments over the past few years. It has successfully diversified into railways and defence sector and has seen a 222 per cent YoY growth in its industry segment ordering.
"Apart from railways and defence, BHEL sees a plethora of opportunities in segments such as coal gasification, nuclear, hydro pump storage, floating solar, etc. We expect BHEL to witness an average order inflow of Rs 25,000 crore over FY24–26E, leading to its order book improving from Rs 14,800 crore in FY23 to Rs 70,000 crore by FY26," it said.
Antique Stock Broking has revised upward its share price target on Bharat Heavy Electricals Ltd (BHEL) while maintaining its buy rating on the stock. Despite strong execution, it expects BHEL's order book to rise to an all-time high of Rs 2 lakh crore and believes earnings could grow exponentially over the next three years, given strong operating leverage.
With the completion of legacy orders by FY25, Antique expect the new cycle of orders for BHEL to enter the execution phase FY26 onwards and, hence, it increased its FY26 earnings estimates by 13 per cent.
"Given the improved visibility of thermal ordering over the next two years we increase our exit multiple to a PE of 30 times (earlier 26 times) and maintain BUY rating with a revised target price of Rs 299 (earlier Rs 230)," it said.
Antique said BHEL has reported a robust order inflow in 9MFY24 of Rs 36000 crore (up 102 per cent YoY). It has already bagged three large orders such as 3x800 MW NLC Talabira Thermal Power Plant, 1x800 MW ultra-super-critical expansion unit at DCRTPP (Yamuna Nagar, Haryana), and 2x800 MW NTPC Singrauli Super Thermal Power Project Stage-III in the March quarter. These orders are worth Rs 30,000 crore, exluding taxes.
"We had estimated 4 GW of thermal ordering in FY24, while BHEL has already received 6.5 GW of thermal orders to date. We therefore believe the company is expected to witness a meaningful reversal in its ordering cycle over the next 3–4 years, led by both industry (non-power) and power segments. We therefore increase our average annual order inflow estimate from Rs 60000 crore to Rs 70,000 crore," Antique said.
The broking firm said BHEL’s earnings are anticipated to climb up multi-fold over FY24–26 supported by strong ordering, improving execution, and the benefits of operating leverage.
Antique noted that BHEL has been diversifying its business into non-power segments over the past few years. It has successfully diversified into railways and defence sector and has seen a 222 per cent YoY growth in its industry segment ordering.
"Apart from railways and defence, BHEL sees a plethora of opportunities in segments such as coal gasification, nuclear, hydro pump storage, floating solar, etc. We expect BHEL to witness an average order inflow of Rs 25,000 crore over FY24–26E, leading to its order book improving from Rs 14,800 crore in FY23 to Rs 70,000 crore by FY26," it said.