Stay away from BHEL for now: Nitin Raheja

In a chat with ET Now, Nitin Raheja, CIO, AQF Advisors, shares his views on BHEL.

ET Now: The other stock which I want to discuss with you is BHEL. The stock has seen a mesmerising move. It is up more than Rs 45 from the recent low and this has happened on back of very poor and disappointing set of numbers. What BHEL has reported for the quarter gone by is absolutely disastrous set of numbers because margins have contracted from 11% to only 7%.

Nitin Raheja: The case with BHEL is very clear. If you look at the BHEL business in the shorter term, the kind of order book and what is going to happen to the power sector in terms of incremental capacities and orders to be placed, the outlook does not look very positive for BHEL. What happens with the stock price is a different story because we have seen stocks either get euphoric or they get overly pessimistic. Ultimately there is some value ascribed to every company which is intrinsic to its business. BHEL had got sold out so much and had gone to a level where there was intrinsic value.

So, you saw some amount of deep value kind of buyers coming in hoping for some turnaround. On the other hand also, we have seen a lot of these infra cyclicals like L&T, BHEL who have had run up from their lows on optimism that the economy will bottom out and you will see the investment cycle start and markets typically try and pre-empt that. For most investors, I would say that we should stay away from the stock and if you have invested, there is a lot of money that has been made and one should actually look to encash because the whole cycle is going to take a long time to come specific to BHEL which is really more purely a power equipment company vis-à-vis a L&T.