The Hindu Business Line : BHEL: Long-term buy

AT Rs 480, BHEL trades at 16 times its 2004-05 expected per share earnings of Rs 30. Given the long-term prospects for the power generation sector, BHEL should be able to maintain a 20 per cent bottomline growth for the next four/five years. Investors with a long-term view can consider exposures at current levels.

The stock may remain range-bound at least till the Budget. The first clear signal for the long-term growth prospects of the company would be the Government's Eleventh Plan. Internal improvements such as cycle time reduction, steps for improving the working capital cycle and the growth in the services segment could help improve margins. But margins can be expected to be stable as the effect of these improvements might largely be mitigated by the increase in input prices.

BHEL has almost written off its VRS expenses; only Rs 19 crore is left to be written off this year. The net profit for 2003-04 was depressed due to the one-time write-off of VRS expenses for the year.

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