NEW DELHI: Global multinational companies are looking to shift value chains out of China following the coronavirus-led disruptions, and India, which has so far lagged behind, wants its share of the pie in this big shift.
To give 'Make in India' a lift, a domestic
PSU firm has called for expression of interest (EOI) from foreign companies, which wish to use its currently idle factories.
At Rs 23, shares of this heavy engineering company are trading at the lowest level since 2003. This is when the company’s net cash position accounts for 70 per cent of its market-capitalisation (m-cap), and receivable book stands at nearly five times its m-cap at Rs 38,000 crore.
Analysts said if things materialise, this will be favourable for the company, whose half the land bank remained unutilised thus far. Estimating the first such deal to take place only after 12-18 months, they expect the stock to see a re-rating soon.
The stock is
BHEL.
CLSA says BHEL could emerge as an engineering R&D services provider, a contract manufacturer, or a lessor of urban-area industrial land. “This could be a test case of a central public sector enterprise monetising its assets to unlock value against
government divestment. Success should determine the extent of stock rerating to its asset value,” the global brokerage said.
A strategic buyer could unleash working capital efficiency, which has blocked a substantial part of BHEL’s balance sheet, it said.
“Assuming 90 per cent value of its gross block and 95 per cent recovery from its receivables, BHEL could be worth about 4.5 times the current price,” it said.
The PSU is looking to offer 16,400 acres of landbank in integrated facilities, centrally located in major cities, industrial clusters and demand centres. MNCs eyeing India face a lot of problems in securing land.
“India has so far lagged in grabbing a share of the global supply chain shift from China. One of the key reasons for this underperformance is lack of ready-made land bank, delay in approvals and fear of dealing with Indian bureaucracy,” said Emkay Global.
BHEL said it is looking for partnerships to manufacture LCD panels for
TVs and mobile phones, transportation products such as rolling stock, locomotives and traction motors and heavy electrical equipment.
The move came after the US Secretary of State Mike Pompeo said on April 29 that his government was working with India, Japan, Australia, New Zealand, South Korea and Vietnam to reduce reliance on China.
10 stock ideas that can make money over 2-3 weeks
Money making ideas
6 May, 2020
After a stellar end to April, domestic markets again took a turn for the worse and erased nearly half of last month's gains in just two trading days of May. Despite the market selloff, here are a few stocks that top market experts say can offer good returns over 2-3 weeks.
Bharat Forge| Buy| Target Rs 347| Stop loss Rs 287
6 May, 2020
This counter appears to have registered a breakout from its Inverted Head & Shoulders formation which is a bullish reversal sign, the analyst said. This formation signals the end of vertical correction which was in progress from the highs of Rs 533 at least for the near term, he said. Positional traders can buy into this counter for a price target of Rs 347 with a stop below Rs 287 on a closing basis.[Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in]
Fortis Health Care| Buy| Target price Rs 142| Stop loss Rs 117
6 May, 2020
This counter appeared to be in a consolidation mode between Rs 135 – Rs 115 levels over the last couple of weeks, hinting at a strong near-term bottom around Rs 115. Moreover, on Thursday, this counter appears to have registered a minor breakout from its descending trendline on lower time frame charts with strong price appreciation from the lower end of consolidation range, the analyst said. He advised positional traders to buy now and consider adding further on declines between Rs 123 – Rs 118 and look for a target of Rs 142. Stop suggested for the trade is close below Rs 117.[Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in]
Maharashtra Seamless| Buy | Target price Rs 270| Stop loss Rs 198
6 May, 2020
This counter appears to have initiated a pullback attempt on the back of multi-week consolidation with a base around Rs 190. Thursday’s strong upmove on the back of huge volumes is hinting that a short term upswing is in the offing, the analyst said. Considering the fact that price is up by 10 per cent in last session itself, he advises adopting a two-pronged strategy of buying now and to add further on dips in the zone of Rs 209 – Rs 204. Traders can look for an initial target of Rs 242 and once that level is decisively conquered a bigger target of Rs 270 cannot be ruled out. Stop suggested for the trade is close below Rs 198.[Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in]
Hindustan Unilever| Buy| Target price Rs 2,330| Stop loss Rs 2,135
6 May, 2020
After a strong pullback rally from Rs 1,800 to Rs 2,610, the stock is currently witnessing price correction. In the last week, the stock was down near 4 per cent. However, the short term structure of the stock is still in the positive side, the analyst said, adding that currently, HUL is trading near important retracement level along with oversold stochastic cycle on daily charts. This indicates a strong possibility of fresh uptrend wave from current levels. The analyst recommends buying this stock with a target price of Rs 2,330 and a stop loss of Rs 2,135.[Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities]
Even in the most optimistic scenario, the first revenue contribution from such a partnership will materialise only after 12-18 months, Emkay said. “However, we believe the stock offers an attractive risk-reward profile.”
CLSA noted that more than 50 per cent of the land is unutilised and could be worth more than the market capitalisation of the company.
BHEL’s m-cap at present stands at roughly Rs 8,000 crore. Once a laregecap, the company has lost 93 per cent of its value in last 10 years. The firm’s order book stood at Rs 1.09 lakh crore at the end of December quarter.
The government has asked embassies abroad to identify companies scouting for options.
Invest India, the government’s investment agency, has received inquiries mainly from Japan, the US, South Korea and China, expressing interest in relocating to the Asia’s third-largest economy, Bloomberg reported.
On Thursday, BHEL’s shares traded at Rs 23, with a trailing 12-month P/E multiple of 10.77 times.
“We continue to see near-term weakness with slow orders and bulging receivables. However, the steep stock price correction coupled with strong balance sheet strength and long- term potential make a case for an earning upgrade,” said Globe Capital. It has a target price of Rs 41 for the stock. .
CLSA has a 12-month target of Rs 40 on the stock while Emkay has a target of Rs 37.