Transcript BHEL - Venkataraman

BHEL LTD.,
We recommend to Buy with a price target of 2900 & 3600.
Buying Level : 2050-2150.
Target
: 2600-2900-3600.
Support levels : 1900-1950.
Resistance
: 2400.
Technical Out Look:
The scrip has taken a strong support at 2000
levels which acts as 23.6% fibonocci levels from top .
The scrip has also taken trend line support at these
levels and if crosses 2150 levels and closes, will zoom
to the major resistance at 2400.
if crosses 2400 on weekly close will attain short and
long term targets respectively.
Company Outlook
We have noticed that several projects (Talwandi Sabo – 1,200 MW in Punjab and
Bhadrawati/Chandrapur – 1,000 MW in Maharashtra) earlier envisaged to be
Developed by state electricity generation companies (as per February 2007 report
of working group on power) have been offered to the private sector under the
tariff-based bidding route.
We believe that state governments have several incentives to promote private
investments in lieu of their own—(a) they can source power at most competitive
rates arrived at on basis of competition and (b) they can withdraw own
investments from power generation sector to focus spending on other social
sectors such as education and health etc.
Business Outlook
Land acquisition, coal linkage and other clearances, payment security remain
as significant hurdles before these projects become a success
We believe there are significant hurdles before these projects become successful
such as land acquisition, coal linkage and environmental clearances. For instance,
the RFQ for a 1,000-MW project in Karnataka states that while the government
would try to facilitate coal linkage and has taken up the matter with central
government, ultimate responsibility for fuel arrangement lies with the successful
bidder. Other requisite clearances (environmental etc.) are expected to proceed on
similar lines. Payment security for private sector investments in power generation
also depends upon improvement in the financial health of state electricity utilities.
The problem would be compounded if there are significant investments by the
private sector as the finance of state electricity utility companies may not be in the
shape needed to provide reasonable comfort to several projects at a time.
Business Outlook
Higher proportion of capacity addition by private sector potentially implies
higher competition for BHEL
We highlight that a higher share of the private sector in capacity addition implies
potentially higher competition for BHEL. While central and state utilities are
comfortable in placing negotiated orders on BHEL and accord a preference to
BHEL’s equipment, private sector developers are more open to consider
competitive equipment from other vendors based on pricing, performance and
ability to meet deadlines. BHEL’s market share in the private sector projects has
been lower at about 25% in the XIth plan projects awarded so far versus more
that 70% market share in the state and central government projects.
Financials
Disclaimer:
This report has been prepared solely for information purposes and
the information contained herein may not be deemed to be an investment
advice. Such information is impersonal and not tailored to the investment
needs of any specific person. The information contained herein is not a
complete analysis of every material fact representing any company,
industry or security. The views expressed may change. While the
information contained herein has been obtained from sources believed to
be reliable, no responsibility (or liability) is accepted for the accuracy of its
contents. Investors are advised to satisfy themselves before making any
investments and should consult with and rely upon their own advisors
whether and how to use such information in making any investment
decision. Neither the author nor his firm accepts any liability arising out of
use of the above information/ article. This report is exclusively for the
clients of Venkataraman & Co. only.
VENKATARAMAN & CO.,
Stock & Share Brokers, New No.2 (Old No.52)
Dr. Ranga Road, Mylapore, Chennai 600 004.
Web: www.venkataraman .com E-mail: [email protected]