CNBC-TV18’s stocks editor, Udayan Mukherjee - BGR Energy is expensive but good and that’s different from saying good but expensive. My sense is that it will go pretty easily because everything in power is so richly valued now and if this whole generation story is going to play out as the market expects it to then companies like BGR will have to benefit. Because what they do is they make capital equipment for power projects. So if one is betting on the sector adding huge amount of mega watts in the next three-four years and ultra mega power projects coming in then they will have to source some of these items from companies like BGR Energy. If one is bullish on utilities and energy or generation then one has to be bullish per se on capital equipment tool for power plants.
I think they are also trying to inch their exports up in the Middle Eastern markets, which is another additional positive. Valuations of course are quite expensive like anything in that space 40-50 PE multiple. But that has not stopped people from buying into this space at all. So I don’t think BGR will be stopped.
It’s got a good German collaboration, which the market will like as well. That’s one point and for a company, which will do Rs 1,000-1,200 crore in terms of revenues this year, FY08, it has got an order book of Rs 3,300 crore. So at least next two-three years we have got clean visibility, the order book is nearly three times annual sales.
So next two years one need not to worry about revenue growth or profit growth at all, margins also seem to be respectable. So I suspect it will get done despite being expensive. Right space and just nicely positioned for to play out the big power generation story.
Source: Moneycontrol.com
Wednesday, December 5, 2007
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