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Buy BHEL, target of Rs 1546: Sharekhan

Posted on: March 31st, 2009 and is filed under Brokerage Recommendations.

Sharekhan has maintained its buy rating on Bharat Heavy Electricals, BHEL with a price target of Rs 1,546 in its March 30, 2009 research report. “BHEL’s strong revenue visibility (with an order book of 4.8x FY2008 revenues) coupled with its strong balance sheet makes it our preferred pick in the sector. We expect the company to report a turnover growth of 31.6% year on year (yoy) and profits to grow at 8.3% yoy. For the full year, the company would be making a provision of Rs 1,313 crore for increment in wages, as recommended by the Sixth Pay Commission. For Q4FY2009, the provision would be to the tune of Rs 475 crore. We expect the total order inflows for FY2009 to rise by 39%, while the backlog should settle at a 19% growth on a year-on-year (y-o-y) basis.”

“BHEL currently has a strong Rs 1,13,500 crore worth of orders on hand, imparting revenue visibility for the next three to four years, which makes BHEL our preferred pick in the sector. At the current market price, the stock trades at 16.9x FY2010E earnings and at a premium to the Sensex owing to its resilient business model and strong balance sheet. We reiterate our Buy on the stock with a price target of Rs 1,546,” says Sharekhan’s research report.

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