BHEL's current valuation - cheapest in the decade

MUMBAI: The heavy engineering major – Bharat Heavy Electrical Limited’s ( Bhel) stock touched a 52 week low of Rs 197.80 in the morning trade today. While the stock did recover some of its losses by the end of the trading day to close at Rs 202, the consistent decline in the company’s share price over past couple of years has made this heavy weight one of the cheapest available capital goods companies in the markets today.

At the current levels, Bhel’s share trades at a price-earning multiple of about 7.7, which in fact, its lowest valuation since 2002. The stock had earlier commanded a price earning multiple of 8.3 in Dec ’02 and had been on an increasing trajectory until Dec ‘2007 when it was one of the most expensive stocks commanding a P/E of over 45.

However post financial crisis and more so since the derailment of industrial investment in India since 2010, the company’s stock price has been bleeding consistently. The stock price in fact mirrors the company’s financial performance where margins are clearly under pressure and also apprehensions about its future earnings as new orders as hard to come by.

This apathetic state of affairs is however not just restricted to Bhel, but the entire industrial segment of the economy is reeling under intense slowdown. It is thus high time that the industrial policy and reforms recover from its paralytic mode and take initiatives to trigger investment in the industrial segment.