 "BEML: Board this train as bumpy ride may end")
The news of the Cabinet Committee on Economic Affairs opening up commercial mining to central and state-owned public sector units lifted BEML by about seven per cent in trade on Thursday. BEML already tops the chart of public sector companies, with returns of about 38 per cent year-to-date, despite losing some ground in the past few months due to weak results. The outperformance should continue on improving business prospects.
This outperformance comes at a time when heavy equipment industry is reeling under the pressures of listless order inflow. In contrast, BEML’s railways and metro (R&M) and defence segments have seen an improvement in order flows, and their shares to order book now stand at 31 and 24 per cent, respectively. Metro rail expansion, outlined in about 15 cities, will create a huge demand for rolling stock. Yellapu Santosh of Angel Broking estimates the R&M segment to report 18 per cent revenue growth during FY15-17 (at Rs 1,371 crore). Further, with an order book size of Rs 1,970 crore from R&M segment, ICICI Securities said BEML would take new orders only after meeting its planned capital expenditure till FY17.
Removal of ban on Tatra trucks has helped BEML regain its monopoly in the defence space (mainly 8X8 trucks). The government’s thrust on increasing the in-house defence capabilities and its defence spends augurs well for the company.
BEML reported an operating loss in the previous two quarters due to an increase in employee costs and marketing spends. While the loss was lower at Rs 6 crore in September quarter (Ebitda loss of Rs 24 crore in Q2'FY15) helped by better yields from the high-margin M&E segment, analysts believe, it might take a couple of quarters for the company to benefit from its ongoing cost optimisation plans.
This outperformance comes at a time when heavy equipment industry is reeling under the pressures of listless order inflow. In contrast, BEML’s railways and metro (R&M) and defence segments have seen an improvement in order flows, and their shares to order book now stand at 31 and 24 per cent, respectively. Metro rail expansion, outlined in about 15 cities, will create a huge demand for rolling stock. Yellapu Santosh of Angel Broking estimates the R&M segment to report 18 per cent revenue growth during FY15-17 (at Rs 1,371 crore). Further, with an order book size of Rs 1,970 crore from R&M segment, ICICI Securities said BEML would take new orders only after meeting its planned capital expenditure till FY17.
Removal of ban on Tatra trucks has helped BEML regain its monopoly in the defence space (mainly 8X8 trucks). The government’s thrust on increasing the in-house defence capabilities and its defence spends augurs well for the company.
BEML reported an operating loss in the previous two quarters due to an increase in employee costs and marketing spends. While the loss was lower at Rs 6 crore in September quarter (Ebitda loss of Rs 24 crore in Q2'FY15) helped by better yields from the high-margin M&E segment, analysts believe, it might take a couple of quarters for the company to benefit from its ongoing cost optimisation plans.