Avoid BHEL for now: P Phani Sekhar

ET Now spoke to P Phani Sekhar, Fund Manager-PMS, Angel Broking, on BHEL.

You liked what you saw from BHEL stable? They have beaten all the consensus estimates by a very hefty margin, be it order intake, be it the top line FY11 growth or even the bottom line for that matter?

I liked what I saw but still it is not good enough for me to put my money on BHEL, that explains the state of mind for a large number of investors in BHEL. That is partly because there are four large EPC companies that are starting operations in the next 18 months, so I do not think the size of the market is big enough for BHEL to maintain its 65% market share. As and when you see that market share drops and by the way this is not a B2C business like a Maruti that it can hold onto its market share for longer than people can imagine. It is a strictly B2B business and timelines and execution schedules are sacrosanct. BHEL because of its higher market share is unable to meet those timelines and since it was a monopoly, power companies had no option but now with Chinese equipment manufacturers coming in, if you combine all these factors, you do not get a very comfortable feeling that the company will be able to hold its market share in the next 2-3 years and if that were to happen, forget earnings, you can actually see a retardation in the top line. As and when that happens, these higher PE multiples of 22-23 times might look like a joke. So in the near term, yes, numbers have beaten forecast, it is time to party, the stock will go up but it will take a quarter by quarter outlook. It will take a very brave investor to put money for 1-2 years on this stock.