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BHEL bags Rs4,400cr order for Supercritical Power Plant in UP

Bharat Heavy Electricals Ltd (BHEL) has bagged a major order for setting up a 1×660 MW supercritical thermal power plant in Uttar Pradesh.

Valued at approximately Rs4,400cr, the order has been placed on BHEL by Uttar Pradesh Rajya Vidyut Utpadan Nigam Ltd (UPRVUNL).

BHEL has been a major partner in the power development programme of Uttar Pradesh. Significantly, over 70% of the state’s power generating capacity, aggregating to more than 17,800 MW, has been installed by BHEL. Notably, 7,210 MW, which is 92% of the total thermal capacity addition during the last 6 years in the state, has been contributed by BHEL.

The stock is currently trading at Rs82.25 up by Rs0.85 or 1.04% from its previous closing of Rs81.40 on the BSE.

BHEL’s order backlog at the Q3FY18 end was Rs1,02,200cr, out of which only ~20% are slow moving orders (40% at the Q2FY18 end). We expect a recovery in power segment and execution of legacy orders to aid its order book and sales. BHEL is pursuing growth in transportation, railways, T&D, solar, water and defence space and targets 50% non-coal sales mix (30% at present) over the medium term. It expects to get orders from NTPC’s flue-gas desulfurization (FGD) tender for new SOx emission norms. We project sales and PAT to grow at 9% and 58% CAGR respectively (FY17-20E). We estimate cost control via indigenization, lesser provisions and rising sales to improve EBITDA margin by ~390bps to 7.8% by FY20E. The stock attractively trades at P/E of 15.5xFY20E.

BHEL has 20,000MW manufacturing capacity. It is the market leader in generation equipment space with 55% market share of the total installed power capacity. BHEL derived 79.2% of its revenue from power segment and remaining from the industrial segment (transmission, transportation, renewables, defence) in FY17.