Bhel: A review - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Bhel: A review

Dec 17, 2002

When we reported on Bharat Heavy Electricals Limited (Bhel) September quarter performance, the headline read 'Orderbook at Rs 135 bn'. The headline indicated the way we view Bhel's story. This company's performance cannot be judged on a quarter to quarter basis.Bhel is the country's largest engineering company responsible for 65% of the total installed power plants. The company is a major in project implementation and its orderbook of over Rs 135 bn will vouch for its abilities. In the past, it has been criticised for having 'too broad' product portfolio (from transformers to thermal power sets). Higher employee numbers as well as the PSU status has continually seen the stock trading at a discount to its peers on the bourses.

In recent times, Bhel has addressed two of those 3 issues. From FY02, the company has looked at outsourcing some of the manufacturing to free more resources for design and development. Moreover, its employee base has been pruned by nearly 30% from over 62,000 employees in FY99 to 48,000 in FY02. Also, Bhel has made efforts to reduce its dependence on NTPC orders. It has been a successful bidder in international markets against global competition.

Moving away from fundamentals, at present, there is no plan for Bhel divestment. There are other clear cases for disinvestment for Mr. Shourie to look at. In all likelihood, Bhel will continue to be a PSU in the forseeable future. For the investor, this is a positive, as one can look at the company's fundamentals without a bias towards its divestment prospects.

In our view, Bhel will continue to dominate the Indian engineering scene. Its growing expertise in project execution, scope of growth in the power sector and its success abroad (Rs 9.9 bn exports in FY02) make it a sound case for investment. However, management function is government dependent, which is a concern. At Rs 167, the stock trades at 7x our FY03 estimates, Price to book value of 0.8x. Historically, the stock has traded at a P/E band of 7x to 12x. Considering the current valuations, the stock is at the lower end of the spectrum.

Equitymaster requests your view! Post a comment on "Bhel: A review". Click here!


More Views on News

BHEL 2020-21 Annual Report Analysis (Annual Result Update)

Oct 19, 2021 | Updated on Oct 19, 2021

Here's an analysis of the annual report of BHEL for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of BHEL. Also includes updates on the valuation of BHEL.

BHEL Shares Tumble 18% on Disappointing March Quarter Results (Views On News)

Jun 14, 2021

BHEL's net loss narrowed to Rs 10.4 bn in the March 2021 quarter.

Infrastructure Boom Ahead. Here are 3 Ways to Play It... (Views On News)

Aug 24, 2021

India is expected to become the third largest construction market next year. For that, it needs huge investments.

G R Infraprojects Makes a Bumper Listing on Bourses. Big Gains for IPO Investors (Views On News)

Jul 19, 2021

GR Infra shares were subscribed over 100 times in its IPO.

Here's Why the Stock of Ashoka Buildcon was in Focus Today (Views On News)

Jul 13, 2021

Ashoka Buildcon shares up on bagging NHAI project.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 6, 2021 03:36 PM