Power point: BHEL gets the spark after UBS report

The earnings numbers may not have much to write home about for Bharat Heavy Electricals (BHEL). But the UBS report is making up all that lost ground. It remains positive on the stock and believes that fundamentally, the current overhang is an opportunity to buy the same.

[caption id=“attachment_21911” align=“alignleft” width=“380” caption=“BHEL has admitted that there has been little progress on the announced follow-on offerings (FPO). David Gray/Reuters”] [/caption]

The management meeting note keeps you in the loop.

The company has admitted that there has been little progress on the announced follow-on offerings (FPO). To UBS, this is likely to remain an overhang in the near term as investors may believe that the price band to be fixed for the FPO would be determined by the current share price and the government may offer a discount and the stock will be available at a reduced price later.

Despite negative news flow on the power generation sector – such as concerns about coal availability, mounting SEB losses, increased costs of financing – the company says there has been no slowdown in the power equipment business. It expects new order for FY12 to be in line with 2011 of around 15 gw.

BHEL achieved an order flow of Rs 60,500 crore in FY11. Its current orderbook stands at Rs 1,64,100 crore. Though the management did not give any guidance on the order flow, it’s confident of achieving the inflow level of 2011, which includes bulk tendering orders. NTPC plans to go for 11 super critical sets of 660 mw each in the first phase of the bulk tendering. BHEL expects this order will be completed by the first quarter of FY12. It is also keen on nine super-critical sets of 800 mw each in the second phase of bulk tendering. This is expected to be completed in FY12.

The management expects some power sector reforms over the next 6-12 months.