Bhel has out performed the market in recent sessions following hopes of improved  performance on the back of the company's healthy order book position.

The scrip of the state-run power equipment major has risen by around 17 per cent to Rs 229.10 on 17 April 2003 from a recent low of Rs 196.25 touched on 11 March this year. The 30-share BSE Sensitive Index (Sensex) has shed 170.41 points, or 5.40 per cent, in the same  period. Daily volumes on the Bharat Heavy Electricals (Bhel) counter have averaged around 14 lakh shares in the last one month.

While the market slide is largely due to the crash in tech stocks, Old Economy stocks have also accounted for the weakness. However, the Bhel stock has bucked the trend on sustained buying support from institutions.

Unit Trust of India was an active buyer on the Bhel counter. Prudential ICICI, Templeton and Morgan Stanley also bought the stock following its attractive valuation and the company's strong order book position.

The Electricity Bill, that was cleared in Parliament last week, has also kept the Bhel stock firm. From its 52-week low of Rs 144 touched on 1 November 2002, the stock has risen by 59.09 per cent. The stock touched its 52-week high of Rs 236.70 on 2 April 2003.

According to a recent research report of ICICI Securities, Bhel is poised for better times with both the book-to-bill ratio and project margins set to peak over the next two years.

For the year ended 31 December 2003, Bhel recorded a provisional 9 per cent rise in net profit to Rs 511 crore (Rs 468 crore) on a 3 per cent increase in turnover to Rs 7,510 crore (Rs 7,287 crore).

As per the I-Sec report, order backlog, pace of conversion of book-to-bill and order pipeline are on track. "The fourth quarter of FY-2003 would see order intake momentum being restored. Order intake to date, in the quarter, has been healthy at about Rs 4,500 crore (up 10 per cent y-o-y), implying order backlog would be around Rs 14,000 crore. Valuations are at the lower end of the historical band," said the report.

Bhel is likely to announce improved results for the current financial year. As per reports, the company expects a double-digit growth, with order book position in excess of Rs 14,000 crore.

Recently, Bhel bagged a gas turbine project in Libya worth Rs 1,128 crore and another one from Oman worth Rs 270 crore. It also secured a mega order worth Rs 2,125 crore from National Thermal Power Corporation for setting up the 1,000 MW Stage-III of Vindhyachal Su per Thermal Power Station in Madhya Pradesh, comprising two units of 500 MW.

Bhel is presently executing contracts at Talcher STPS (2,000 MW) in Orissa, Rihand STPS (1,000 MW) in Uttar Pradesh and Ramagundam STPS (500 MW) in Andhra Pradesh for NTPC. All the projects are progressing on schedule.

Meanwhile the Union Budget for 2003-04 has proved to be harsh for Bhel as it has slashed customs duty on high voltage transmission equipment from 25 per cent to 5 per cent. The move would reduce the total cost of import of such equipment and may put pressure on the demand for domestic power equipment.

However, the Budget has been held to be favourable for the power sector in the long-term due to the proposed reforms. It has laid emphasis on infrastructure, which could form the core trigger for industrial development. Other proposals in the Budget include the extension of the mega power project policy to all power projects.

The Electricity Bill could lead to improvement in the financials of the power equipment sector. The Bill seeks to abolish the current restrictions on power generators.

Analysts feel the Bill could be a step towards reform of the power sector, and could rekindle private investment interest, like what the new telecom policy did for the telecom sector. They said the Bill will improve the health of state electricity boards. This, in turn, will help Bhel improve its financials as the power equipment major receives 60 per cent of its revenues from SEBs.

For the third quarter ended 31 December 2002, Bhel posted a net profit growth of 1.5 per cent to Rs 81.33 crore, compared to Rs 80.15 crore in the corresponding period of the previous year. Total income increased by 14 per cent to Rs 1,699.76 from Rs 1,490.17 crore in DQ 2001.

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