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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Highlights
~Technical Collaboration
~Growth potential in Railway and Metro Rail sector
~Opportunity in defense sector
~Growing demand in construction and Mining
equipment sector
~ Future visibility
Company Background
Bharat Earth Movers Ltd (BEML), Mini-Ratna Company, is
a Government of India enterprise. It is the second largest
manufacturer of earth moving equipment in Asia and has
a 70% share in the domestic market.
The company primarily deals in three product segments
comprising
~ Mining and construction equipments,
~ Defense products and
~ Railway and metro products
Through these business segments, it caters to applications
in diverse sectors of the economy, such as mining, steel,
cement, power, irrigation, construction, road building,
defense, railway and metro transit system. BEML's
products are manufactured at its three existing facilities
located at Bangalore and Mysore in Karnataka. The
company has exports to more than 55 countries around
the world.
Valuation
The future outlook of the company is promising with
drivers like infrastructure development activities,
industrial growth and favorable defense policy regulations
will drive growth of BEML. The company is currently
trading at TTM PE of 11.9x, 10 years historical trend shows
that the company’s TTM PE is trading at median of 17-18x
viz-a-viz average growth of the company is 10%. Hence
company is trading at around 50% discount on TTM PE
basis. We expect the fair value of the company to be Rs.
950.
Key Highlights
~ Technical Collaboration
BEML and Kamaz Vectra signed a Memorandum of
Agreement for mutual business co-operation and
development on February 25, 2010 at Bangalore in order
to capture the prevailing markets in defence, Para-military
and police forces as also in the mining sectors through
mining tippers up to 28 tonne capacity. Kamaz Vectra
Motors is a pioneer in design, development and
manufacturing various segments of commercial and heavy
vehicles for on-road applications. This strategic alliance
will enable company to develop and supply 4x4 Stallion
types of vehicles for on-road applications satisfying the
specifications of the defence, paramilitary and police
forces.
~ Growth potential in Railway and Metro Rail sector
The expansion of the railway sector is taking place in a
faster phase with the growth of Indian economy. As a
result coaches and Electrical Multiple Units demand is
estimated at 22,689 units over the Eleventh Five Year Plan
but currently the combined production capacity of Railway
is around 2,500 units per annum only and it is estimated
that there is around more than 10,000 units of demandsupply
gap on coaches and Electrical Multiple Units in the
Eleventh Five Year Plan and in the case of metro rail there
is lot of demand for standard gauge coaches from the
Delhi Metro Rail Corporation and also there are plans for
metro rail services in many cities in India and these will
produce more demand for the company in coming years.
~ Opportunity in defense sector
At present a major portion of the Indian defense hardware
is sourced from overseas. With the modernization of
Indian armed forces it is expected that the total spending
will be exceed to $30bn by 2012 and the opportunities
expected to exceed $100bn in coming decades. India is in
the process of switching from being almost exclusively a
buyer of military equipment to becoming a manufacturer
in its own right. This offset policy is beneficial for the
Indian companies like BEML where as the policy requires
foreign suppliers of defense equipment to source
components and the other goods from Indian companies.
This development will help the company for its future
growth.
~ Growing demand in construction and Mining
equipment sector
As the Indian economy is growing the demand for the
equipments for the construction and mining is also
increasing. In recent years the mechanized mining
operations have becoming more and more popular it led
to high mechanization in order to maximize the output of
coal and minerals as a result there is a marked trend in the
introduction of large capacity and higher sized mining
machines. All these left a vast opportunity for the
companies in this field.
~ Future visibility
BEML’s current order book stood at approximately Rs
5,000 crore giving future visibility for the company.
Valuation
The future outlook of the company is promising with
drivers like infrastructure development activities,
industrial growth and favorable defense policy regulations
will drive growth of BEML. The company is currently
trading at TTM PE of 11.9x, 10 years historical trend shows
that the company’s TTM PE is trading at median of 17-18x
viz-a-viz average growth of the company is 10%. Hence
company is trading at around 50% discount on TTM PE
basis. We expect the fair value of the company to be Rs.
950.
Concerns
Increases in the cost of raw materials and components or
an increase in labor costs likely to cause margin pressures
and adversely impact its earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Highlights
~Technical Collaboration
~Growth potential in Railway and Metro Rail sector
~Opportunity in defense sector
~Growing demand in construction and Mining
equipment sector
~ Future visibility
Company Background
Bharat Earth Movers Ltd (BEML), Mini-Ratna Company, is
a Government of India enterprise. It is the second largest
manufacturer of earth moving equipment in Asia and has
a 70% share in the domestic market.
The company primarily deals in three product segments
comprising
~ Mining and construction equipments,
~ Defense products and
~ Railway and metro products
Through these business segments, it caters to applications
in diverse sectors of the economy, such as mining, steel,
cement, power, irrigation, construction, road building,
defense, railway and metro transit system. BEML's
products are manufactured at its three existing facilities
located at Bangalore and Mysore in Karnataka. The
company has exports to more than 55 countries around
the world.
Valuation
The future outlook of the company is promising with
drivers like infrastructure development activities,
industrial growth and favorable defense policy regulations
will drive growth of BEML. The company is currently
trading at TTM PE of 11.9x, 10 years historical trend shows
that the company’s TTM PE is trading at median of 17-18x
viz-a-viz average growth of the company is 10%. Hence
company is trading at around 50% discount on TTM PE
basis. We expect the fair value of the company to be Rs.
950.
Key Highlights
~ Technical Collaboration
BEML and Kamaz Vectra signed a Memorandum of
Agreement for mutual business co-operation and
development on February 25, 2010 at Bangalore in order
to capture the prevailing markets in defence, Para-military
and police forces as also in the mining sectors through
mining tippers up to 28 tonne capacity. Kamaz Vectra
Motors is a pioneer in design, development and
manufacturing various segments of commercial and heavy
vehicles for on-road applications. This strategic alliance
will enable company to develop and supply 4x4 Stallion
types of vehicles for on-road applications satisfying the
specifications of the defence, paramilitary and police
forces.
~ Growth potential in Railway and Metro Rail sector
The expansion of the railway sector is taking place in a
faster phase with the growth of Indian economy. As a
result coaches and Electrical Multiple Units demand is
estimated at 22,689 units over the Eleventh Five Year Plan
but currently the combined production capacity of Railway
is around 2,500 units per annum only and it is estimated
that there is around more than 10,000 units of demandsupply
gap on coaches and Electrical Multiple Units in the
Eleventh Five Year Plan and in the case of metro rail there
is lot of demand for standard gauge coaches from the
Delhi Metro Rail Corporation and also there are plans for
metro rail services in many cities in India and these will
produce more demand for the company in coming years.
~ Opportunity in defense sector
At present a major portion of the Indian defense hardware
is sourced from overseas. With the modernization of
Indian armed forces it is expected that the total spending
will be exceed to $30bn by 2012 and the opportunities
expected to exceed $100bn in coming decades. India is in
the process of switching from being almost exclusively a
buyer of military equipment to becoming a manufacturer
in its own right. This offset policy is beneficial for the
Indian companies like BEML where as the policy requires
foreign suppliers of defense equipment to source
components and the other goods from Indian companies.
This development will help the company for its future
growth.
~ Growing demand in construction and Mining
equipment sector
As the Indian economy is growing the demand for the
equipments for the construction and mining is also
increasing. In recent years the mechanized mining
operations have becoming more and more popular it led
to high mechanization in order to maximize the output of
coal and minerals as a result there is a marked trend in the
introduction of large capacity and higher sized mining
machines. All these left a vast opportunity for the
companies in this field.
~ Future visibility
BEML’s current order book stood at approximately Rs
5,000 crore giving future visibility for the company.
Valuation
The future outlook of the company is promising with
drivers like infrastructure development activities,
industrial growth and favorable defense policy regulations
will drive growth of BEML. The company is currently
trading at TTM PE of 11.9x, 10 years historical trend shows
that the company’s TTM PE is trading at median of 17-18x
viz-a-viz average growth of the company is 10%. Hence
company is trading at around 50% discount on TTM PE
basis. We expect the fair value of the company to be Rs.
950.
Concerns
Increases in the cost of raw materials and components or
an increase in labor costs likely to cause margin pressures
and adversely impact its earnings.
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