Bhel stock soars 7.4% on hopes TN venture will bring in more orders

Bhel stock soars 7.4% on hopes TN venture will bring in more orders

New Delhi: India’s biggest power-equipment maker, Bharat Heavy Electricals Ltd (Bhel), gained the most in four trading days in Mumbai on expectations a planned venture to build high-efficiency power plants will bring in more such orders.

Bhel said on 26 October it signed an agreement with the Tamil Nadu Electricity Board to set up a venture to build a 1,600MW thermal power project using so-called supercritical technology. The utility will cost Rs8,500 crore, the New Delhi-based company said on its website.

The orders that Bhel is likely to secure from the venture will pave the way for more contracts for supercritical power plants, which use lower energy than normal to generate higher pressure. The company may win some orders from National Thermal Power Corp. Ltd, India’s biggest utility, and Andhra Pradesh Generation Co., HSBC Holdings Plc. analyst Sumeet Agrawal said.

“We expect order wins in few of those projects to provide good earnings visibility post 2012, as most of the power projects in India after that would be based on supercritical technology," HSBC’s Agrawal wrote in a note to clients on Monday. He rates the stock “overweight" and expects the shares of Bhel to reach Rs2,645 in the next 12 months.

Bhel’s shares rose for the third successive day to close at a record Rs2,612—up 7.42% on Monday at the Bombay Stock Exchange.

Power supply in Asia’s third biggest economy during the peak hours of 6pm to 11pm lags behind demand by more than 13%. To narrow this gap, the Union government is working on setting up eight large power projects using supercritical technology, with each generating at least 4,000MW. On Monday, the New Delhi-based Bhel was expected to report a 27% rise in second quarter profit to Rs460 crore, according to the median estimate of six analysts polled by Bloomberg. Bhel may win at least Rs3,200 crore of orders because of the Tamil Nadu project to build high-efficiency plants, Agrawal said.

The venture would build two plants of 800MW each. The company may investRs660 crore in the project, headded. Bloomberg