Tuesday, July 8, 2008

Investment Idea: BHEL

Bharat Heavy Electricals Ltd or BHEL as it is recognised, is the largest engineering and manufacturing enterprise in India in the energy-related/infrastructure sector, today. BHEL was established more than 40 years ago, manufactures over 180 products under 30 major product groups and caters to core sectors of the Indian economy. It has 14 manufacturing divisions, four Power Sector regional centres, over 100 project sites, eight service centres and 18 regional offices, and its employee strength is 42,600.
The company has posted a good performance for the year ended 31st March 2008. Its net sales rose by 12.34% at Rs.19,365.46 crore. Its mainstay continues to be the power sector, 80% of its turnover comes from this sector alone, the rest from the other industries. What is interesting to note is that in FY08, 14% of the total turnover came through commercialization of products and systems developed by way of in-house R&D efforts.
Significantly, during the year, BHEL spent over Rs.464 crore on R&D, which is 83% more than the previous year’s 68%. Infact, the R&D spend at 2.14% of the turnover, is among the highest in India in its kind of industry. Another notable achievement of FY08 has been the significant growth in Intellectual Capital with around one Patent/Copyright filed every alternate working day. It filed 175 patents and copyrights during the year, enhancing the company’s intellectual capital to 664 patents and copyrights filed.
The company’s PBT rose 18.58% at Rs.4,430.39 crore and PAT was up 18.41% at Rs.2,859.34 crore. Its equity capital doubled up from Rs.244.76 crore to Rs.489.52 crore in FY08 on account of the 1:1 bonus. EPS for the year was at Rs.58.41.
Power is its mainstay and with the current emphasis, which the Govt has laid in power sector growth, naturally, BHEL would be one of the biggest beneficiaries, what with the number of mega-power projects being created. If one looks at the turnover, it becomes apparent that the company is working at full capacity and for it to now reach a higher level, it will have to expand. Otherwise, its growth will be restricted.
All said and done, BHEL is a good buy at the current rate, if you have a 2-3 years horizon in mind.
Source: sptulsian.com


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