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BHEL News on Bloomberg (3)   13-Feb-08 18:32Tracked by (1)  
Posted by:   Rajmars on ( 13-Feb-08 18:32 )
Rating      
Price : BSE: Rs 1981.75 ( 5.52 % ), NSE: Rs. 1975.10 ( 5.12 % )
Feb. 13 (Bloomberg) -- Bharat Heavy Electricals Ltd., which lights three of every four homes in India, may rise 49 percent as Asia's third-biggest economy spends $200 billion to keep the power on in Mumbai, Delhi and Bangalore.

BNP Paribas Asset Management U.K. Ltd. is purchasing shares of the state-run company even as Bharat Heavy's 10-fold stock gain over the past five years sputters. Other buyers include Templeton Asset Management, according to regulatory filings.

India's effort to add at least 600 gigawatts of electricity by 2030 to rival China is luring investors to the turbine and generator maker as a benchmark stock in the world's second- fastest growing economy. Investors are betting a large chunk of new orders will be awarded to the New Delhi-based virtual monopoly, India's only government-controlled maker of power equipment, as it adds manufacturing capacity to cope with a four- year order backlog.

Bharat Heavy is clearly part of the equation to invest into India's power sector, said Chakri Lokapriya, who manages the equivalent of $1.2 billion of stocks across India, China, Russia and Brazil at London-based BNP. Over the long run, stocks like Bharat Heavy are outperformers.

Outlook

Bharat Heavy may climb to a record 2,946 rupees in the next year, the average projection of 15 analysts surveyed by Bloomberg. The stock has declined 23 percent on the Bombay Stock Exchange this year, compared with an 16 percent drop in the Sensitive Index. Still, buy recommendations outnumber holds by 18 to 4. No analyst has a sell rating on the stock.

The shares rose 6 percent to 1,981.75 rupees at the 3:30 p.m. close of trading on the Bombay Stock Exchange today, posting their biggest gain in three weeks.

India, which produces 128,182 megawatts of electricity, needs to generate about 13 percent more power to meet current demand. The government plans to add more than 76,000 megawatts in the next five years and equipment to produce three-fourths of that is already on order. Utilities will turn on about 10,000 megawatts of capacity by next month.

Bharat Heavy looks attractive from the growth perspective, said Mahesh Patil, whose $1 billion equity portfolio at Birla Sunlife Asset Management Co. in Mumbai includes Bharat Heavy. The opportunities are good and Bharat Heavy should win a lot of contracts.

Fat Order Book

The capacity addition fattened the company's order book, forcing some customers to wait four years as it failed to expand its factories fast enough. The Punjab State Electricity Board and other customers have levied penalties of as much as 950 million rupees ($23.9 million) as compensation for project delays caused by late equipment deliveries.

Bharat Heavy is spending 32 billion rupees to boost capacity by half, to 15,000 megawatts, by 2009. The expansion will add at least 25 percent to annual revenue, analysts said. The company may double net income to 61.8 billion rupees in the year ending March 31, 2010, on sales of 384 billion rupees, according to a Bloomberg survey of six analysts.

There'll be an exponential growth in India's power sector,Devender Singh, joint secretary at the power ministry, said in an interview in Mumbai.

Shortfall

Still, the addition may not be enough to meet a 13 percent demand shortfall during the peak hours of 6 p.m. to 11 p.m., leading to blackouts in the capital New Delhi and other major cities and forcing some factories to use backup generators and reschedule production.

The equipment shortfall has attracted new rivals such as Japan's Mitsubishi Heavy Industries Ltd., Dongfang Electric Corp. of China and South Korea's Doosan Heavy Industries and Construction Co. Local companies including Larsen & Toubro Ltd., India's biggest engineering and construction contractor, also have entered the business, urged by the government.
We want other companies to set up equipment-making capacities here to meet demand,Singh said.

Deyang, China-based Dongfang, which supplies about 40 percent of China's hydropower equipment, won a contract for a 1,015 megawatt project in southern India after Bharat Heavy pulled out. Changwon, South Korea-based Doosan will build a $1.22 billion, 4,000 megawatt facility in India for Tata Power Co., its biggest overseas contract.

New Rivals

Larsen & Toubro is partnering with Tokyo-based Mitsubishi Heavy in a 7.5 billion rupee venture to build boilers and turbines. Billionaire Anil Ambani, whose Reliance Power Ltd. in January sold $3 billion of shares in India's biggest initial share sale, also is a contender. His company is building a third of the new projects in India.

Still, Bharat Heavy's status as a preferred vendor gives it an edge. The company also is adapting a more efficient technology called supercritical in its boilers, generators and turbines in partnership with France's Alstom SA to fend off competition. The technology helps generate more
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