Media reports indicate BHEL as L2 in NTPC’s second bulk tendering ::Angel Broking,

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Media reports indicate BHEL as L2 in NTPC’s second bulk tendering
Media reports have indicated that Doosang Heavy Industries and BHEL have emerged as
L1 and L2, respectively, in NTPC’s second bulk tendering of SC equipment (9x800MW) in
the boiler segment. Accordingly, Doosang Heavy Industries is eligible to get orders for five
boilers (~`5,300cr–5,625cr) and BHEL for four boilers (~`4200cr–4500cr), respectively,
given BHEL meets the quotation of the L1 player i.e., Doosang Heavy Industries. This is a
positive development for BHEL, given that the current scenario in the power segment is
dismal, plagued by various reasons, and as the segment has witnessed a considerable
slow down. Also, the bids for turbine generator are expected to open today, which if won
by BHEL would lead to more positive news for the company.
BHEL has guided for an order inflow growth of 10% (`66,500cr), which seems steep,
especially considering order inflow of mere `2,471cr in the first quarter. We expect the
company to miss its guidance and markets are factoring the same. Further, given the
intensifying competition from domestic as well as overseas players, we believe it will be
difficult for BHEL to maintain its existing profitability margins and current market share in
the long term. The attractive valuations of 12.3x FY2012E EPS and 10.8x FY2013E EPS are
largely overshadowed on account of the aforementioned woes. Likewise, the FPO element
will remain an overhang in the near term, thereby providing a limited upside. Given the
long-term structural concerns, we remain Neutral on the stock.