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Merrill Lynch raises BHEL to buy

Merrill Lynch said on Friday it has raised its long term rating of state-run Indian engineering and power equipment maker Bharat Heavy Electricals Ltd (BHEL) to buy from accumulate.

The brokerage house said the upgrade was based on revised earning forecasts.

"Our revised forecasts in the light of current order book and pipeline indicate a 15 per cent earnings CAGR (compounded annual growth rate) from FY01-03E," the report said.

It said the company had the most appealing business fundamentals in the sector with its strong order book, forecasts of improved margins and low share price.

BHEL stock ended Friday 3.2 per cent higher at Rs 151.40. The stock is trading 54 per cent below its year high price of Rs 232.15 touched on January 10.

The report said the stock fully reflects the macro-economic deceleration in capital goods output and also the fact that most ongoing power projects are at early stages of implementation.

BHEL's order backlog is skewed towards long gestation power projects awarded mainly in the year ended March, 2000, the report said.

It said the company will earn significant profits from these projects in the year 2002-03.

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