BHEL shares tank 8% after Q4 results miss street expectations

Shares of  Bharat Heavy Electricals Limited (Bhel) fell 7.58 per cent to hit an intraday low of Rs 295 apiece on Wednesday.

The fall came after the company announced its Q4 results, which missed Street expectations.

Bhel’s net profit fell approximately 26 per cent on a year-on-year (Y-o-Y) basis to Rs 489.6 crore in the quarter ended March 2024 (Q4FY24), from Rs 658 crore in the same quarter a year ago (Q4FY23).

The company’s revenue rose marginally (0.4 per cent) to Rs 8,260.3 crore in Q4FY24, from Rs 8,227 crore in Q4FY23.

Bhel’s earnings before interest, taxes, depreciation, and amortisation (Ebitda), also known as operating profit, dropped 30.6 per cent to Rs 727.9 crore in Q4FY24, as compared to Rs 1,049 crore in the same quarter a year ago.

Ebitda margin, meanwhile, squeezed 400 basis points (bps) to 8.8 per cent in the March quarter of FY24, from 12.8 per cent in the March quarter of FY23.

The Board has recommended a final dividend of 0.25 per share for FY24.

"Final dividend, if declared by the company in the Annual General Meeting shall be paid/dispatched within 30 days from the date of Annual General Meeting,” Bhel said in an exchange filing.

 

Should you buy, sell, or hold? 

According to reports, analysts at Morgan Stanley have an 'equal-weight' call on Bhel, with a target price of Rs 220. Analysts highlighted concerns regarding the depleted vendor base and an extension of attractive terms to vendors as major risk factors, along with the earnings miss.

Similarly, CLSA has given a 'sell' rating, with a target price of Rs 189, expressing surprise over the company’s decline in Q4 profit after tax (PAT).

In contrast, domestic brokerage Nuvama Institutional Equities said: "We upgraded Bhel to a Braveheart ‘buy' in July 2023 when the stock was at Rs 94, noting the power balance shift towards a deficit scenario since May 2023, with peak deficits expected from August-September 2023.

We maintain our rating and project earnings per share (EPS) compound annual growth rate (CAGR) of over 88 per cent for FY25–27E, despite conservative assumptions, including a reduced market share in thermal power, delayed execution pickup by FY26, higher provisions, and operating expenses, and a slower ramp-up in the operating profit margins."

Meanwhile, analysts at ICICI Securities reiterated their 'buy' recommendation for Bhel, citing a robust order book, a promising pipeline of potential orders, and anticipated margin recoveries from the second half of the financial year 2025 (H2FY25). They have revised their target price upwards to Rs 370, based on a 40x FY26E earnings multiple.

Bhel’s market capitalisation is nearly Rs 1.06 trillion, according to the Bombay Stock Exchange (BSE).

Shares of Bhel settled 5.42 per cent lower at Rs 301.90 apiece. By comparison, S&P BSE Sensex soared 0.36 per cent to end at 74,221.06 level.