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ML Bullish on BHEL

April 2, 2007

Merill Lynch is bullish on the state owned PSU giant, BHEL. In a research report published today, ML reiterated BUY with a price target of Rs 2,760. Merill expects BHEL to report an EPS of Rs 115.35 for FY08 and Rs 142.22 for FY09.

ML analysts met the management of BHEL and raised FY08E & FY09E earnings estimates by 4.2% & 14.6% respectively, as they are double sure of continued strong order pipeline. Following a series of orders from NTPC & SEBs to BHEL, ML expects a historic order intake Rs310bn +64%YoY & backlog of ~Rs500bn +35%YoY in FY07. This announcement on April 3rd should reassure market, which has been worried on new orders due to competition. Our view is that in power market which is likely to more than double in FY08-12E, BHEL would grow volumes at mid/high teens, while it may lose a few basis points of share to cheaper supplies (China/Russia).

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