BHEL: Diwali Muharat Pick by ShareKhan

Visit http://indiaer.blogspot.com/ for complete details �� ��


BHEL is a premier power generation equipment manufacturer and a leading EPC company. It has emerged
as the prime beneficiary of the four-fold increase in the investments in the power sector in India.
BHEL currently has orders worth Rs148,000 crore on hand, which provides revenue coverage for the next
three to four years. We believe the order inflow momentum would continue to remain strong for the
company.



However, the key challenge for BHEL would be the timely execution of projects.
The company is confident of bagging orders for at least five boilers and four turbines as far as the bulk
tendering by National Thermal Power Corporation (NTPC) is concerned. The order finalisation for the
same is expected in January 2011.

The company has already expanded its capacity to 15GW in FY2011. Also, the project to expand the
capacity to 20GW by FY2012 is being executed on a fast track. In our view, the stabilisation of the new
capacity coupled with the de-bottlenecking of the supply chain would aid order execution and sustain
robust growth in BHEL’s revenues in the coming years. We estimate the profits to grow at a compounded
annual growth rate (CAGR) of 21% over FY2009-11E.

Valuation: At the CMP of Rs.2466, the stock is trading at 22.6x and 19.1x its FY2011E and FY2012E earnings.
The near-term positive trigger in the stock is the order inflow in the power equipment business.