we all know about the business aspects of bhel so no need discussing those. one of the important aspects of picking up stalwarts for portfolio building is when there are perceived fears surrounding a stock or sector and i believe bhel suffers from such fears currently.
bhel has many attributes of good investment worthiness:
1). market leader
2). debt free
3). high roe with good cash generation
4). good dividend payout
some negatives perceived by markets are
1). poor sectoral prospects
2 order book concerns
3). govt ownership
coming to some financial relevant details:
cmp 222 market cap 54165 crores
book value 112
share capital 489 crores with each share of rs 2.
outstanding shares 244.5 crore shares of rs 2 each.
as on sep 12 statement of accounts:
long term borrowings at 128 crores, short term borrowings at 1668 crores
cash and equivalents at 5307 crores, non current investments 461 crores, current investments 100 crores.
outstanding order book as on q2 fy 13 is 122300 crores
revenues for fy 12 was 49509 crores and net profits was 7039 crores.
for hy fy 13, revenues at 19750 crores (against 18188 cr for h1 fy 12) and net profit at 2195 cr ( vs 2227 for h1 fy 12)
company has been generating roe in excess of 25% since past five years.
the cash flows for bhel have been significantly higher than the capex it has done. i read in one research report that company generated operating cash flows of 25600 crores during fy 02 to fy 11 and did capex of only 6300 crores.
though bhel may not see the fast growth shown in past few years, it is likely to maintain moderate growth in next few years and since the cost of capital of bhel is significantly below return on capital, bhel seems attractive for someone wanting to invest for long term.
order book concerns and sectoral concerns are there but one needs to take a guess at how much is built into current prices. plus any initiative by the govt on disinvestment or such other process may provide surprising upsides.
div yield is 2.9% at cmp.
promoters hold 67.72% equity.
the current fall in prices has been due to lacklustre performance of the company since past few quarters and even more due to sluggish order inflow.
main concerns of market relating to bhel are about competition from chinese players, poor perception of the sector it operates in mainly power and coal sector and an overall lethargy to stocks from these sectors.
technically the stock has made multiple bottoms at around 195-196 and support at these levels seems to be strong.
for someone wanting to play the pick up in infra and energy and power sector bhel seems to provide a safe and lucrative option.