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BHEL: Results Out, Nothing Spectacular To Report


I’d mentioned BHEL around April 2 last year, when they announced fairly good results. Today they announced their provisional results.

The EPS growth is only about 20%, from 49.3 to 57.5. Their order inflow was 35,000 cr. and is now at 50,000 cr. The book must be quite a bit more, around 60,000 cr. The current price of Rs. 1800 gives them a P/E of 30.

I don’t think it’s worth a buy. Why? My original assessment had some valid and invalid assumptions:

  • They would do around 22,000 cr. in revenue. (Sorta achieved)
  • They would grow at 30% on EPS this year (not so. EPS Growth only 20%)
  • Order book growth would increase revenue this year (not so, revenue stayed at 22K cr. Means they are at full capacity)

The overall target of Rs. 2900 in 2012 (5800 divided by 2 for bonus) probably still stands at an averaged growth of 20% a year on EPS. That gives you a Rs. 1,100 return on a 1,800 investment, which is about 60% return in four years, or about 12.5% annualised. At that rate I would not rate it high enough to be a stock pick – in fact I have my doubts about whether it would outperform the Nifty from here. (Nifty’s P/E is 20 today)

Not much to report, but interesting to see where I was right and wrong. I got into this stock at 2300 (1150 post bonus) and exited at 1650 or so, a 44% profit in four months. BHEL went phenomenally up since then and reached nearly 2800 – I missed all of that ride – and then fell back to today’s 1800 levels. It was not a momentum pick for me when I saw it, it was based on fundamentals, so I don’t particularly mind missing the upside (in fact my momentum portfolio gave me a similar upside return). I don’t like to show off – it’s not my style – but it’s heartening to know that some convictions were on the dot. Where I was wrong was in not recognising the force of the (temporary) momentum on power stocks – but who’s to predict that?


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