Taking Stock: BEML stock is a good short term buy

BEML Limited (formerly Bharat Earth Movers Limited) was established in 1964 as a public sector undertaking for manufacturing of rail coaches and mining equipment in Bangalore. Government of India owns 54% of the total equity and the balance 46% is held by public, financial institutions, foreign institutional investors, banks and employees. BEML, being a “mini ratna” plays a pivotal role and serves India’s core sectors like defence and aerospace, rail, power, mining and infrastructure. The company started with a modest turnover of Rs 5 crore during 1965 and today, thanks to its diverse business portfolio, the company has been able to achieve a turnover of more than Rs 3,500 crore. Its three major business verticals, viz., mining and construction, defence, and rail and metro are serviced by its manufacturing units located at Bangalore, Kolar Gold Fields (KGF), Mysore and Palakkad. New triggers can emerge on the back of expected revival in the domestic capex cycle and BEML is poised to benefit immensely. With rigorous efforts being made by the present government in increasing coal production, coupled with allotment of new mines to the private sector, BEML can benefit from increased demand in the mining equipment sector. In the rail and metro segment, it has booked orders until 2018 and fresh orders will be taken up in the coming year.

BEML has forayed into high-tech metro trains deployed for intra-city commuting and is expanding its infrastructure to meet the greater needs of metro projects coming up in the country. The company also supplies integral rail coaches’ equipment to Indian Railways. With metro projects being planned in over 15 cities and the company’s experience in the manufacturing of all kinds of rolling stock, this segment will contribute significantly to the overall growth of the company. Meanwhile, in the defence and aerospace sector, BEML has a monopolistic position in the supply of Tatra trucks to Indian Army. The BEML management has recently announced that the company is aiming at orders worth Rs 5,000 crore for the next year. The sectoral break-up could be as follows—with the mining and construction space contributing around Rs 2,200 crore, rail and metro segment contributing around Rs 1,600 crore, while the balance orders worth Rs 1,400 crore will be taken up by the defence and aerospace sector. The business scenario is very bright for BEML, as during the 12th Plan the country is planning to invest nearly Rs 55 lakh crore on infrastructure, Rs 5.50 lakh crore to buy defence equipment and weapons and spend Rs 5.20 lakh crore to develop an efficient public and freight transport system. The BEML stock currently quoting at Rs 970 is an excellent buy for the short term. The stock can give an absolute 10% return in the next two months from the present levels.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.