BHEL Q4 Shocker! Profit Drops 25%, But Orders Surge – Buy or Sell?

• BHEL’s Q4 profit dived 25% despite a surge in orders.
• Astral’s pipe segment saw healthy growth, but margins were weak.
• ONGC’s profit beat estimates, driven by lower costs and higher other income.

BHEL Q4 Shocker: Brokerage Calls and Comments on Stocks Following Q4 Results

BHEL (Bharat Heavy Electricals Limited)

CLSA on BHEL
-Rating: Sell
-Target Price: ₹189 per share

Comments:
– BHEL reported a surprising 25% decline in its Q4 Profit After Tax (PAT).
– The company’s order backlog increased by 44% year-on-year (YoY), driven by a surge in thermal orders.
– Despite this backlog growth, the company had another weak quarter operationally, with flat execution.
– The decline in PAT was primarily due to slow-moving orders, resulting in a 25% YoY drop.
– For the fiscal year 2024, BHEL’s gross margin fell by 58 basis points, which management indicated should represent the bottom.
– A notable positive was the resurgence in fossil fuel orders, attributed to concerns over energy security.
– However, the long-term outlook for BHEL’s thermal business appears bleak beyond FY30.

Morgan Stanley on BHEL
– Rating: Equal-Weight
– Target Price: ₹220 per share

Comment:
– BHEL’s Q4 earnings fell short of expectations.
– The company’s operating cash flow was weak due to an increase in net working capital.
– Despite the earnings miss, there is improving earnings visibility, supported by strong orders and a robust prospective pipeline.
– A significant risk factor for BHEL is its depleted vendor base, coupled with the necessity to offer attractive terms to these vendors.

Astral

Jefferies on Astral
– Rating: Hold
– Target Price: ₹2,150 per share

Comments:
– Astral’s Q4 results were in line with estimates, leading Jefferies to maintain its EPS forecasts for FY25-26.
– The company reported healthy volume growth in its pipes segment, with Q4 seeing a 23% year-on-year increase and FY24 witnessing a 24% rise.
– However, this growth was outpaced by Supreme Industries, which saw pipe volume growth of 41% in Q4 and 34% for FY24.
– Progress in Astral’s new categories appears to be on track.

CLSA on Astral
– Rating: Sell
– Target Price: ₹1,800 per share

Comments:
– Astral’s Q4 performance fell short of expectations despite robust growth in pipe volumes.
– The disappointing results were attributed to weak margins and challenges in the international adhesives business.
– Management has forecasted robust growth of 15-20% in both the pipes and adhesives segments for FY25.
– In the medium term, addressing manufacturing gaps is expected to drive strong growth.
– Additionally, the introduction of new products and expansion into new business verticals are anticipated to contribute to growth.
– However, with the stock trading at 62 times the projected FY26 PE, this growth appears to be already factored into the current price.

PI Industries

Jefferies on PI Industries
– Rating: Buy
– Target Price: ₹4,165 per share

Comments:
– PI Industries’ Q4 revenue missed estimates by 6%, with both the agrochemical and pharmaceutical segments weaker.
– However, EBITDA was in line with expectations, driven by strong gross margins despite challenges in the pharmaceutical division.
– Profit After Tax (PAT) stood at ₹370 crore, marking a 32% year-on-year increase but an 18% quarter-on-quarter decline. However, it was 6% ahead due to a lower tax rate.
– The company’s key focus areas include growth and margin improvement in the Custom Synthesis & Manufacturing (CSM) and domestic business segments.
– Additionally, there is a significant focus on ramping up pharmaceutical operations over FY25.

Metropolis

Morgan Stanley on Metropolis
– Rating: Equal-Weight
– Target Price: ₹1,792 per share

Comments:
– Metropolis reported a 15% growth in EBITDA for Q4, meeting expectations.
– Core revenues in Q4 increased by 15% year-on-year, driven by a 7.3% growth in core patient volumes.
– The contribution remained stable quarter-on-quarter, accounting for 15% of total revenues.

ONGC (Oil and Natural Gas Corporation)

Jefferies on ONGC
– Rating: Buy
– Target Price: ₹390 per share

Comments:
– ONGC’s standalone EBITDA for the quarter was in line with expectations.
– Profit After Tax (PAT) surpassed estimates by 14%, primarily due to lower exploration costs and increased other income.
– Production levels were largely in line with expectations.
– Management has provided guidance for the ramp-up of the KG field to peak over the second half of FY25.
– Additionally, they anticipate the modalities of premium gas price from nomination blocks to be in place by the first quarter of FY25.
– Despite recent performance, the valuation of ONGC is at a steeper discount to Nifty compared to its long-term average.

SBI Card

Morgan Stanley on SBI Card
– Rating: Equal-Weight
– Target Price: ₹750 per share

Comments:
– SBI Card witnessed a rise in market share in April, with spending increasing nearly 50 basis points month-on-month to reach 15.7%.
– However, the year-on-year spending growth was slower, standing at 1%, compared to the industry’s growth of 18% in April.
– This deceleration in spending growth is attributed to the impact of the recent notification by the Reserve Bank of India (RBI) concerning corporate card spending.

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