BHEL — Poised For Revival: ICICI Securities
Bharat Heavy Electricals during FY22 witnessed improvement in execution as most Covid-related challenges abated.
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ICICI Securities Report
Bharat Heavy Electricals Ltd. during FY22 witnessed improvement in execution as most Covid-related challenges abated. Reduction in fixed costs and reversal of provisions helped Ebitda turn positive at Rs 7.4 billion.
Though the proportion of raw material costs to sales remained elevated at ~72%, we expect the recent softening of commodity prices and higher operating leverage to further enhance profitability.
Order intake in FY22 grew 76% YoY to Rs 236 billion, led by Rs 120 billion from the nuclear segment. Order book as on FY22 stood at ~Rs 1 trillion (4.3 times trailing twelve months sales).
The Central Electricity Authority has recently (in the Draft National Electricity Plan) announced coal-based capacity addition of 43 gigawatt over the coming decade.
This has further strengthened our conviction on the stock as we believe the new coal plants ordering will give BHEL time to ramp up its non-power segments in the coming years.
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