>BHEL (Japyee Capital)

● Strong Order Backlog: With an impending order backlog of Rs. 1135 and expected to close the fiscal year FY09E at Rs. 1200 , clear revenue visibility can be seen for the next 4‐5 years timeframe. High orders from NTPC & other government entities reduce the risk of order cancellations in this economic downturn. With a reigning market share of 60‐70% in the power equipment arena, Bhel will witness strong order inflows with the 12th five year plan in the offing.

● Power to ALL by 2017: With an average GDP growth rate of 7‐8% for the next 10 years, India’s insatiable demand for power which is c120 GW is expected to soar to 315‐335 GW by 2017. India will require generation capacity of 415‐440 GW, which implies a tripling of installed capacity from c140GW translating into an annual addition of 20‐40 GW. This implies fivefold to tenfold the 4 GW per year that was achieved in the last 10 years. This will drive growth in equipment manufacturing.

● Supercritical boilers to be the mainstay of future: Almost 50% of the 12th 5 year plan will have projects based on supercritical technology. A major stimulus for bulk order for supercritical power equipment worth an estimated Rs 21,000 crore is likely to be thrown open for bidding in FY10 to the domestic power equipment sector. Nine units from NTPC and two units for Damodar Valley Corporation of 660 Mw each have been ordered. Chinese equipment manufacturers with no domestic manufacturing facilities in the country have been barred from bidding raising concerns regarding the quality and efficacy of Chinese equipment in harsher Indian conditions, where high‐ash coal is used.

● De‐bottlenecking & lining up additional capacities: Plans are afoot to augment capacities to 15,000 MW from c10000 MW per annum by December, 2009 with an investment of Rs 42000 mlns and to 20,000 MW per annum by December 2011 with an investment of Rs.48000 mlns, via internal accruals. This will iron out capacity constraints on the company and fasten its execution capacities that should augur well for organic expansion in power sector.

To see full report: BHEL