BHEL Up 6% on New Orders, Jury Out on Road Ahead
Mumbai : B h a r a t H e av y Electricals (BHEL) surprised the market with a 6% jump on Thursday after it reported a 42% increase in new orders in FY16. But will it be enough to pull the power equipment major out of its troubles? The jury is still out on that one.
BHEL reported the highest-ever commissioning of new projects and highest order booking in five years. It also reported provisional net loss of ₹ 877 crore versus net profit of ₹ 1,419 crore a year ago. BHEL e n d e d March 2016 with anorderbacklog of ₹ 1,10,000 crore. Its shares, which had fallen 70% from a high of ₹ 290 in June last year to ₹ 90 in March, gained 6% on Thursday and closed at ₹ 119.30, up 33% from recent lows. “The company had a decent order book but lot of its projects were stuck. Now with the government’s initiatives on clearing stuck projects, one expectation is implementation will pick up,” said Sandip Sabharwal, investment advisor.
“BHEL looks cheap at 0.8 times P/B, 0.15 times EV/OB with free cash flow yield of 6-13%,” said Ab h i s h e k P u r i , a n a l y s t , Deutsche Bank. G Chokkalingam, founder of Equinomic Research, however, said that the rally will not last. “It is facing stress on its working capital, hence it’s very difficult to make money,” he said.
Co reported provisional net loss of 877 crore versus net profit of 1,419 crore a year ago