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„West Bengal state genco shift to BHEL v/s Dongfang; Buy
Our talks with WBPDCL indicate that BHEL has won a 1GW (2x500MW) order
worth ~Rs30bn (5% of FY11E inflows and 2% of backlog). This support our view
of a series of large power order wins by BHEL worth Rs205bn ($4.5bn) in the next
5 weeks, to beat its guidance. This order signify to us, acceleration of ordering
activity despite weak sentiments esp. from state gencos, shift in customer of
Dongfang (DF - WBPDCL) to BHEL after failed trials and continued order wins on
higher margin sub-critical technology. BHEL is one of our top picks on 24% EPS
CAGR over FY11-13E with a backlog at 3.3x FY12E sales, and improved
competitiveness trading at 12x FY13E. PO of Rs2960 – 48% potential upside.
Order inflows accelerate despite cloudy skies!
In our report dated Jan 19 2011 Bharat Heavy Electricals, 19 January 2011 we
had called for acceleration in inflows during 4QFY11 (see table 3 & 4) despite
weak sentiments towards capex. We remain comfortable on this key assumption,
barring unforeseen circumstances and we believe the WBPDCL order win
supports this view. Also ASP at Rs30-32mn/MW was healthy for sub-critical
boiler, Turbine, Generator and part balance of plant scope.
Chinese (DF) customers shifting to BHEL post failed trials
Disappointing quality (see interview on page 5), weak operating parameters (chart
3 & 4) and delayed deliveries (see table 1 – WBPDC delayed by 13-15 months)
led to fading excitement on Chinese equipment in India (ex-4 IPP customers).
After Indiabulls (Pvt. IPP), this is 2
nd
Chinese client shifting to BHEL. One of the
plants supplied by DF to the WB state (DPL) is shut for last 8 months (chart 3).
Look beyond financials for more exciting times ahead
BHEL’s product development/SC tech investment has created a platform for
sustained growth, in our view. FY10 capex rose 58%, EVA, 33%, and value
add/staff, 31% YoY. We believe the start of 15GW (10GW) and plans for 20GW
by 2012 support execution.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharat Heavy Electricals
One more Chinese customer
shift to BHEL; Orders pick-up
„West Bengal state genco shift to BHEL v/s Dongfang; Buy
Our talks with WBPDCL indicate that BHEL has won a 1GW (2x500MW) order
worth ~Rs30bn (5% of FY11E inflows and 2% of backlog). This support our view
of a series of large power order wins by BHEL worth Rs205bn ($4.5bn) in the next
5 weeks, to beat its guidance. This order signify to us, acceleration of ordering
activity despite weak sentiments esp. from state gencos, shift in customer of
Dongfang (DF - WBPDCL) to BHEL after failed trials and continued order wins on
higher margin sub-critical technology. BHEL is one of our top picks on 24% EPS
CAGR over FY11-13E with a backlog at 3.3x FY12E sales, and improved
competitiveness trading at 12x FY13E. PO of Rs2960 – 48% potential upside.
Order inflows accelerate despite cloudy skies!
In our report dated Jan 19 2011 Bharat Heavy Electricals, 19 January 2011 we
had called for acceleration in inflows during 4QFY11 (see table 3 & 4) despite
weak sentiments towards capex. We remain comfortable on this key assumption,
barring unforeseen circumstances and we believe the WBPDCL order win
supports this view. Also ASP at Rs30-32mn/MW was healthy for sub-critical
boiler, Turbine, Generator and part balance of plant scope.
Chinese (DF) customers shifting to BHEL post failed trials
Disappointing quality (see interview on page 5), weak operating parameters (chart
3 & 4) and delayed deliveries (see table 1 – WBPDC delayed by 13-15 months)
led to fading excitement on Chinese equipment in India (ex-4 IPP customers).
After Indiabulls (Pvt. IPP), this is 2
nd
Chinese client shifting to BHEL. One of the
plants supplied by DF to the WB state (DPL) is shut for last 8 months (chart 3).
Look beyond financials for more exciting times ahead
BHEL’s product development/SC tech investment has created a platform for
sustained growth, in our view. FY10 capex rose 58%, EVA, 33%, and value
add/staff, 31% YoY. We believe the start of 15GW (10GW) and plans for 20GW
by 2012 support execution.
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