Bhel Stock Research Report by ICICI Securities
Analysis dated 23 September 2024
Sector: Capital Goods
Price on Analysis date: Rs. 266,
Target Rs. 370
(39% upside potential)
Target Period: 12 Months
Thermal equipment ordering is scaling the summit. In our view, it would be overly hasty to write an obituary for thermal or coal-based power yet. We posit, the need to add reliability to the grid has led policymakers to push the pedal on the addition of new thermal power plants. As a result, developers are swiftly finalising and awarding equipment orders. In parallel, the largest coal-based player (NTPC) is on the ready to add another 26GW of new coal-based power; the largest private player has already placed an order for 11GW of coal-based equipment. In entirety, this is fuelling order inflow (OI) for BHEL. Note – BHEL has already announced OI of INR 364bn and is L1 in another 3.2GW (estimated at INR 200bn). As a result, we estimate OI of INR 1trn in FY25 for BHEL. Retain BUY; unchanged TP of INR 370.
Strong guidance by largest thermal player
“The additional coal-based capacity requirement is 80GW, including 28GW
which is currently under construction. Out of the 80GW, your company is
expected to add 26GW of coal-based capacity, including 9.5GW which is
under construction, and all these capacities are planned to be commissioned
by 2031–32” – NTPC annual report (Link).
Largest thermal private player has also pitched in…
Adani has also finalised orders for a total of 11GW to BHEL. Total OI amounts
to INR 220bn. The scope in these orders is limited to the supply of boilers,
turbines and generators.
…leading to a bulging order book (OB) of INR 1.6trn…
BHEL has already announced an OI of INR 341bn, as of FY25–TD (Exhibit 2)
and it is L1 in another 3GW project worth ~INR 210bn.
….and pipeline remains robust
Note that there is another 6–8GW of BTG orders (~INR 240bn) likely to be
finalised in the next couple of months. As a result, we expect BHEL to report
OI of >INR 800bn in FY25E.
Maintain BUY with a TP of INR 370
BHEL continues to benefit from an improving outlook for coal-based capacity
addition. We maintain BUY with an unchanged TP of INR 370 per share
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