Bhel: Neutral outlook

ANALYSTS' CORNER

Enam Securities grades Bharat Heavy Electricals (Bhel) as Neutral relative to the sector. The report states that Bhel continues to witness robust growth in orders driven by increased investments from private sector and strong international business.

Revenues grew by 65 per cent y-o-y in June 05 quarter, while net profit increased by 445 per cent. The power division reported a 77 per cent sales growth.

Moreover, India's peak power deficit or the gap between supply and demand, widened further from 10 to 12 per cent in 2005. Bhel has also been successfully outbidding Chinese competitors.

The report expects operating margins to improve on account of reduction in material cost, fixed cost amortisation on large base and productivity gains. At Rs 1,007, the stock trades at P/E 16x FY06E. The company has posted excellent operating results in June 05 quarter results.

Britannia Inds Outperfomer

Strategic Stratcap Securities rates Britannia Industries as a Market Outperformer. The report states that biscuits category, the affordable and readily eatable form of packaged food, has been growing at 10-12 per cent in volume terms over the past five years.

Thus, new players are entering the market and Britannia's share has come down to its lowest ever, at 38 per cent in May 2005. But consistent growth in the category is expected to lead to steady volumes and savings in excise and taxes may result in CAGR growth of 20 per cent in earnings before tax in next two years.

The report adds that at 13.3x FY07E, the stock is one of the cheapest in FMCG sector. With a growing market, Britannia will manage to grow its top line. The urban market, with around 60 per cent penetration, holds scope.

Dabur India: New initiatives

Enam Securities rates Dabur India as Outperformer relative to the sector. The report states that the new initiatives of the company are taking the front seat. Its consolidated revenues grew 20 per cent y-o-y in June 05 quarter, while net profit jumped 62 per cent.

This was largely driven by lower raw material costs, savings from new manufacturing facility and sourcing initiatives. In the consumer care division, hair oils grew by 11 per cent, but shampoo category declined by 16 per cent in value terms.

The growth in consumer health division was driven by distribution coverage extension and improvement in sales productivity. Foods business continues to grow at a scorching pace, according to the report. Balsara has also managed to deliver profit of Rs 1.1 crore led by cost synergies. At Rs 152, the stock trades at P/E 17.7x FY07E earnings.