BHEL Shares Slump 15% Post Numbers, Motilal Oswal Says “Sell”

Shares of engineering major BHEL tumbled 15 on Monday after the company's consolidated net loss widened to Rs 2,699.70 crore in the financial year 2020-21. The stock declined 17.91 per cent to Rs 62.55 on the BSE. At the Bombay Stock Exchange, it was 15% lower at Rs 65.

The earnings were announced post market hours on Friday. For the quarter ended March, state-owned BHEL's consolidated net loss narrowed to Rs 1,036.32 crore, mainly on the back of higher revenues. The company's consolidated net loss had stood at Rs 1,532.18 crore in the quarter ended on March 31, 2020, according to a regulatory filing. Total income during January-March 2021, rose to Rs 7,245.16 crore, from Rs 5,166.64 crore in the year-ago period. However, in the full financial year 2020-21, the company's consolidated net loss widened to Rs 2,699.70 crore as compared with Rs 1,468.35 crore in 2019-20.

Its total income during 2020-21 dropped to Rs 17,657.11 crore, from Rs 22,027.44 crore in 2019-20. The nationwide lockdown, consequent to the spread of the COVID-19 pandemic globally, caused disturbance and slowdown in the economic activities.

Brokerage firm Motilal Oswal has a sell rating on the stock with a price target of Rs 40, that is a near 50% cut.

"We now estimate FY22E to be loss making and reduce our FY23E EPS estimate by 36%. While orders are few and far between, the pricing environment remains highly competitive, limiting scope for margin expansion. On its ongoing diversification strategy, the company has won its first order for a sulfur recovery unit (SRU) for IOCL Panipat and is restructuring its Solar business division. Any material financial impact is still a long time away. We maintain our Sell rating, and change our valuation methodology to EV/EBITDA basis (from P/E earlier), with a target price of of Rs 40 per share (12x FY23E EV/EBITDA)," the broking firm has said.

With inputs from PTI