Stock watch: Bharat Earth Movers

Bharat Earth Movers (BEML) appears to be a good prospect. The stock closed at Rs 787.80, 0.88 per cent down compared with its previous close of Rs 794.80, touching an intra-day high of Rs 810 with trading volume of 53,006 shares on Tuesday.

Strong export prospects should see the company clock higher revenues and profit this fiscal, brokers said. BEML is the second largest manufacturer of earthmoving equipment in Asia.

It has predominant interest in heavy earth moving equipments and commands 70 per cent market share in domestic segment. BEML also exports machines to over 25 countries in Europe, Africa and the Middle East.

Though rising energy and other input costs could reduce the margins to some extent, the outlook for the company appears favourable.

Driven by strong cost-cutting measures, the company has improved its operating margins dramatically from 4.3 per cent in FY02 to 15.8 per cent in FY05.

Recently, the company entered into an agreement with a US-based company Terex Corporation to sell high-end dump trucks. It has also entered into a joint venture with a Polish firm to explore its business prospects in the defence segment.

In FY05, the company recorded net profit of Rs 172 crore, up 616 per cent from Rs 24 crore in the previous fiscal. Export revenues amounted to Rs 60 crore, up 15.5 per cent from Rs 52 crore in FY04.

"Strong growth in sales coupled with higher productivity and better-cost management has improved its performance in FY05 and the company should do well in this fiscal too," says Himanshu Varia, an analyst with Asit C Mehta Investment Intermediates Ltd.