BHEL Q3 review: Brokerages place positive bet on good order book; margins could improve

Brokerages are placing positive bet on Bharat Heavy Electricals (BHEL) based on a good order book. They expect margins to get better, going ahead.

The company reported a net profit growth of 25 percent (year on year) for the December quarter at Rs 192 crore. The company had posted a profit of Rs 153 crore last year.

The revenues rose over 10 percent at Rs 7,336.4 crore for the quarter under review. Last year, it had reported a revenue of Rs 6,666 crore.

At an operating level, the EBITDA fell 18 percent to Rs 219 crore from Rs 265 crore posted last year.

Meanwhile, the operating margin came in 1 percentage point lower at 3 percent. Last year, it had posted a margin of 4 percent.

Here is a gist of what brokerages have written about the results.

Brokerage: Credit Suisse | Rating: Outperform | Target: Rs 100

The global research firm observed that weakness on margin was partly driven by exchange losses. It has revised earnings downwards by 5/4 percent for FY19/20. It sees scope for margin improving to 8-9 percent from 3-4 percent.

Brokerage: Citi | Rating: Neutral | Target: Rs 84

Citi said that underlying margin was better than the headline. It observed that the order momentum was decent, but is concerned about profitability. The company is favourably placed with orders worth Rs 22,000 crore.

Brokerage: HSBC | Rating; Hold | Target: Rs 75

HSBC sees little downside from current levels. It expects earnings to grow at 2 percent CAGR for FY19-21.

At 11:27 hrs Bharat Heavy Electricals was quoting at Rs 59.30, up Rs 0.40, or 0.68 percent, on the BSE. It touched an intraday high of Rs 59.90 and an intraday low of Rs 57.60.