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BHEL
Investment Profile: Moderate to Aggressive Horizon: 1-1.5 Yrs
Business Summary
BHEL is the largest engineering and manufacturing enterprise in India in the energy related/infrastructure sector today. BHEL was established in 1964, ushering in the indigenous Heavy Electrical Equipment industry in India. BHEL is amongst world‟s rarest few who have the capability to manufacture entire range of power plant equipment. BHEL is maintaining a consistent track record of growth, performance and profitability since 1976-77
Investment Rationale BHEL is a company which is not only involved in manufacturing of traditional power generation and transmission equipment, but also undertake turnkey contracts in setting up eco-friendly Solar power cells. BHEL is also engaged in other sectors like power transmission, oil and gas, transportation etc which would enable the company to set off the risk in one segments by another. BHEL is poised to mark the capacity at 20000 mw by FY12 as a part of its continuous capacity addition program. The higher capacity will help execute the strong order book which is currently stands at INR 1,61,000 crores i.e. 3.30x FY12E revenue. Besides, BHEL is a profit making company for the last 30 years and is consistently paying the dividends to its shareholders. So far, out of the profits generated, the company has been maintaining a payout of about 20-30%. BHEL has been managed to post a bottom line growth at a CAGR of 26% during FY07-FY11. Going forward, we expect the company to post an average growth of 15%. BHEL is also planning to float a NBFC in order to make use of the huge cash surplus of Rs 9,000 crore which can be used to finance power projects. Revenues from the financing projects would enable the company to add its earnings which otherwise would have been kept idle. Apart from the status of a cash rich company, BHELs capital mix is of only 1% debt. It would also be a better choice to invest in a company where the debt content is very low during a time when higher interest rate pressures exist everywhere. Such companies would be free of interest burden, which can act as a negative element in times of slow growth Our DCF model with 15.3% discount rate values the company at Rs.400 per share giving an decent upside from the current level.. We initiate coverage with a BUY recommendation for a target price of Rs.400. Those with a moderate to aggressive risk appetite can consider investing in BHEL at current level.
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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BHEL
Investment Profile: Moderate to Aggressive Horizon: 1-1.5 Yrs
Business Summary
BHEL is the largest engineering and manufacturing enterprise in India in the energy related/infrastructure sector today. BHEL was established in 1964, ushering in the indigenous Heavy Electrical Equipment industry in India. BHEL is amongst world‟s rarest few who have the capability to manufacture entire range of power plant equipment. BHEL is maintaining a consistent track record of growth, performance and profitability since 1976-77
Investment Rationale BHEL is a company which is not only involved in manufacturing of traditional power generation and transmission equipment, but also undertake turnkey contracts in setting up eco-friendly Solar power cells. BHEL is also engaged in other sectors like power transmission, oil and gas, transportation etc which would enable the company to set off the risk in one segments by another. BHEL is poised to mark the capacity at 20000 mw by FY12 as a part of its continuous capacity addition program. The higher capacity will help execute the strong order book which is currently stands at INR 1,61,000 crores i.e. 3.30x FY12E revenue. Besides, BHEL is a profit making company for the last 30 years and is consistently paying the dividends to its shareholders. So far, out of the profits generated, the company has been maintaining a payout of about 20-30%. BHEL has been managed to post a bottom line growth at a CAGR of 26% during FY07-FY11. Going forward, we expect the company to post an average growth of 15%. BHEL is also planning to float a NBFC in order to make use of the huge cash surplus of Rs 9,000 crore which can be used to finance power projects. Revenues from the financing projects would enable the company to add its earnings which otherwise would have been kept idle. Apart from the status of a cash rich company, BHELs capital mix is of only 1% debt. It would also be a better choice to invest in a company where the debt content is very low during a time when higher interest rate pressures exist everywhere. Such companies would be free of interest burden, which can act as a negative element in times of slow growth Our DCF model with 15.3% discount rate values the company at Rs.400 per share giving an decent upside from the current level.. We initiate coverage with a BUY recommendation for a target price of Rs.400. Those with a moderate to aggressive risk appetite can consider investing in BHEL at current level.
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