BEML Ltd:Future growth prospects and outlook,buy/sell/hold,analysis and recomendation

Scripscan:BEML Ltd
cmp:1050
Code:500048

Story:BEML Limited manufactures and sells earthmoving equipment worldwide. The company offers a range of mining machinery for opencast and underground mines. It produces machines, such as electric rope shovels, hydraulic excavators, bulldozers, wheel loaders, wheel dozers, dump trucks, motor graders, pipe layers, tyre handlers, water sprinklers, and backhoe loaders; and mammoth walking draglines for the opencast mines. The company also supplies equipment, which include integral rail coaches, overhead electric inspection cars, postal vans, AC/DC electric multiple units, D-EMUs, utility track vehicles, track laying equipment, broad-gauge railbus, treasury vans, and spoil disposal units. In addition, it manufactures Tatra vehicles for all terrain operations, which comprise bridge layers, field artillery tractors, medium and heavy recovery vehicles, pontoon mainstream bridge systems, crash fire tenders, and mobile mast vehicles. Further, the company supplies engineering mine ploughs, tank transportation trailers, weapon loading equipment, armoured recovery vehicles, milrail coaches and wagons, aircraft weapon loading trolleys, and aircraft towing tractors. Additionally, it sells components and engineering spares; and offers services in areas of computer aided design, computer aided engineering, computer aided manufacturing, development and testing, and technical documentation. "BEML’s healthy Rs 60 billion order backlog largely comprises low-margin Railway orders. We expect modest earnings growth given rising competition and greater share of railways in overall revenues. We thus maintain our Sell rating on the stock. We expect EBITDA margin to contract owing to higher contribution from the Railways (the low-margin business) along with more competition in the mining and construction equipment segment. Our new target price now stands at Rs 882 (12x FY11e EPS.