BHEL Provisions Are New Normal; Retain HOLD : :Emkay

HOLD

CMP: Rs 317                                       Target Price: Rs 376

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n     Q2FY12 performance beats expectations, despite higher Ebidta margin decline– (1) Revenue +24% yoy to Rs105 bn (2) EBITDA +20% yoy to Rs20 bn (3) APAT +24% yoy to Rs14 bn

n     ‘Industry’ segment reports best performance – Revenue +59% to Rs30 bn and Ebit margins highest-ever at 27%; ‘Power’ segment trips with Ebit margin decline of 430 bps to 16.9%

n     Provisions on contractual obligations new ‘Normal’, recurring for last 3 quarters – yet again made additional provisions of Rs2.0-2.5 bn in quarter and Rs4.3 bn for H1FY12

n     Maintain earning of Rs26.4 for FY12E & Rs27.9 for FY13E -Undemanding valuations at 11.3X FY13E earnings. With lack of re-rating catalyst, Retain HOLD