Positive on L&T; value unlocking likely in next 2-3 years: Deven Choksey
One will have to look at two periods — the end of first half and the beginning of the second half of FY16 — to get some idea on BHEL, says Choksey.
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In a chat with ET Now, Deven Choksey MD, KR Choksey Securities, shares his views on capital goods stocks.
ET Now: Divergence in capital goods companies, with BHEL coming with with weak provisional numbers, left many investors disappointed. There are downgrades that have come in thick and fast on BHEL. Conversely, CLSA comes out with the report on L&T, raising the target price for the stock to Rs 2,100. What do you do with these two capital goods majors?
Deven Choksey: BHEL is a struggling company and it would certainly take more time to come back on to the track.
Projects are happening, order book is flowing in, but the execution of projects is definitely taking time.
I think that by the end of first half, or may be in the beginning of the second half of this financial year, you should be getting the first early signs of recovery in BHEL's earnings. One could certainly consider this company, but only after looking at the quarterly performances. One will have to look at two periods — the end of first half and the beginning of the second half of FY16 — to get some idea.
L&T. meanwhile, remains more relatively stable. It has higher amount of order inflows, though order execution part is relatively small as the overall environment is still not picking up pace. Most of the time, when we talk to the management of this company, we do get a hint that as the rate of interest falls, there are many projects which would probably see the light of the day. That is where, I believe, the execution would kick start.
May be the company is gearing up; the customer should be ready to allow it to execute and that is where you should be seeing better performance.
That is one of the reason for which the L&T kind of company remains relatively more on a favourable. Given side given the kind of steadiness in the business that it has demonstrated and the value unlocking proposition that you may have in next two-three years time, it make sense to have this stock in the portfolio for investment purpose.
ET Now: Divergence in capital goods companies, with BHEL coming with with weak provisional numbers, left many investors disappointed. There are downgrades that have come in thick and fast on BHEL. Conversely, CLSA comes out with the report on L&T, raising the target price for the stock to Rs 2,100. What do you do with these two capital goods majors?
Deven Choksey: BHEL is a struggling company and it would certainly take more time to come back on to the track.
Projects are happening, order book is flowing in, but the execution of projects is definitely taking time.
I think that by the end of first half, or may be in the beginning of the second half of this financial year, you should be getting the first early signs of recovery in BHEL's earnings. One could certainly consider this company, but only after looking at the quarterly performances. One will have to look at two periods — the end of first half and the beginning of the second half of FY16 — to get some idea.
L&T. meanwhile, remains more relatively stable. It has higher amount of order inflows, though order execution part is relatively small as the overall environment is still not picking up pace. Most of the time, when we talk to the management of this company, we do get a hint that as the rate of interest falls, there are many projects which would probably see the light of the day. That is where, I believe, the execution would kick start.
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May be the company is gearing up; the customer should be ready to allow it to execute and that is where you should be seeing better performance.
That is one of the reason for which the L&T kind of company remains relatively more on a favourable. Given side given the kind of steadiness in the business that it has demonstrated and the value unlocking proposition that you may have in next two-three years time, it make sense to have this stock in the portfolio for investment purpose.
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