Shares of Bharat Heavy Electricals Limited (BHEL) fell over 9.5% today after brokerage Citi downgraded the stock to sell from neutral stance. The brokerage gave a target price of Rs 34 per share. Subsequently, share price of BHEL declined 9.52% intra day to Rs 38.5 against previous close of Rs 42.55 on BSE.
The stock closed 8.58% lower at Rs 38.90.
The share stands higher than 20 day, 50 day, 100 day and 200 day moving averages but lower than 5 day moving averages. The stock has fallen 10.47% since the beginning of this year and 40% during last one year.
Market capitalisation of the firm declined to Rs 13,545 crore. Total 81.55 lakh shares changed hands amounting to turnover of Rs 32.24 crore on BSE. Citi said the stock has rallied too fast, too soon.
Valuations of the stock have become unappealing considering just 4 per cent return on equity and risks to cash flows and profits, the brokerage said adding that it saw tough times ahead for the state-run firm.
"High receivables continue to pressure cash flows," Citi said, adding that success in new areas will take time.
The stock of the PSU firm surged 80% in the last three months. It hit 52 week low of Rs 19.20 on March 25, 2020.
On July 6, 2020, India Ratings & Research (Ind-Ra) revised the rating on long-term bank facilities of BHEL. The rating agency reviewed the capital goods major's rating to 'IND AA' from 'IND AA+' while reaffirming its outlook to 'Negative'.
In the fourth quarter, BHEL posted net loss of Rs 1,534 crore compared to net profit of Rs 676 crore in the corresponding quarter last year. Total income fell to Rs 5,198 crore in Q4FY20 from Rs 10,492 crore in Q4FY19, while total expenses declined to 5,906 crore from Rs 9,217 crore in the same period.