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Bharat Heavy (BHEL.BO)
Time To Get Constructive On This One. Upgrade to Buy
 In times of stress — The “India Infrastructure Super–Cycle” is showing signs of
stress. The global credit crisis has reduced the quantum of credit available and
increased the cost of the same. In our view, neither will infrastructure capex
come to a standstill, nor can it continue at the same pace as in the last 2 years.
 Go for the most robust order backlog......... — BHEL is working on ~ 48GW
(Rs1040bn – 3.9x FY09E sales) of orders with 85% of orders from the
government (CPSUs/SEBS) and order inflow momentum continues to be strong.
Compared to BHEL, L&T’s backlog is more susceptible to cancellations in times
of extreme stress (45%:55% government: private split). While one cannot
completely write-off order slowdown/cancellation risks, India’s power crisis,
shortage of domestic equipment manufacturing capacity and political backing
should provide enough ammunition to BHEL to neutralize the risks.

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