BHEL Complete Fundamental Analysis and Future Outlook
Bharat Heavy Electricals Limited (BHEL) is the government’s flagship engineering and manufacturing company and has a history of 5 decades of operations.
- The company is an integrated power plant equipment manufacturer with the capability to deliver 20,000 MW of power plant equipment per annum. It caters to all the types of power plants including Coal, Hydro, Nuclear, Gas and Solar.
- The major clientele for the company is Power, Transmission, Transportation (Railway), Renewable Energy, Oil & Gas, and Defence sectors.
- The company is promoted by the government of India which controls over 63% stake. Therefore, BHEL has a high percentage of revenue coming from government projects.
- The company currently has 16 manufacturing units, 2 repair centres, 8 service centres along with the infrastructure to deal with 150+ project sites across the world. BHEL has project footprint in 83+ countries in the world and is currently executing 6 GW projects in 12 countries.
I have evaluated the company on 10 fundamental categories and each has been given a rating out of 5 stars. From this, I have arrived at a combined stock rating for the company.
This is the summary of the analysis. For details check the source link.
Source: BHEL Shares Fundamental Analysis and Future Outlook
Some insights for the coming years from management discussion & analysis (MD&A) and con calls are as follows.
- The new management led by Dr Nalin Shinghal replaced Mr Atul Sobti as the CEO of the company in FY 2019. The management change is due to the deteriorating financial health and plans for turn around. Dr Shinghal has previous experience in such cases and he is known for his well-known turn around of CEL.
- The COVID-19 situation will not impact any projects as they are large engineering projects. However, revenue impact could be there due to factory shutdowns and decreased government expenditure on infrastructure in the future.
- National Infrastructure Pipeline (NIP) plans of overall Thermal capacities going up. Hence old power plants would shut and new power plants will be commissioned to start. 48 Giga Watt worth of opportunity exists for BHEL if this happens.
- Out of the total INR 1.07 trillion government order book, BHEL is favourably placed in around INR 130 billion worth of orders. (INR105 billion in power, INR 9 billion in industrial, INR 17 billion in international).
BHEL has growth opportunities but they are mainly driven by government projects which do not have significant profitability. The company is also facing strong competition for private projects.
Therefore BHEL does not seem to be a good long term investment.
Subscribe to my Blog: Subscribe — Billion Dollar Valuation
Join my Telegram Channel
