One of the biggest concern analysts had about the public sector power equipment major has been the execution of contracts. The firm had always had a strong order book but the execution of these orders was not in line with expectations. The book-to-bill ratio, which measures the billing received by the company from its order book, had fallen to 2.5 times in third quarter of financial year 2005-06. It has now recovered smartly and was pegged at 4.2 times and therefore a cause for optimism amongst analysts. With the stock market scenario and thereby the fund raising prospects for power companies improving the company is expected to see a steady revenue growth. Analysts estimate that around Rs 1,74,086 crore was raised in the power segment and at the moment, Bhel commands a 50% market share in the equipment segment. For the first half of the current fiscal the private sector accounted for around 79% of the order intake. Moreover, National Tariff Policy stipulates that Central and State sector companies to award projects by January 11 for being eligible for CERC methodology of tariff determination. Bulk ordering of 11 supercritical sets (660mw each) by NTPC and DVC, expected in the next fiscal. The government?s stance on restricting Chinese visas and supply is also likely to benefit the company. With the order book remaining strong for the next couple of years, analysts would look at the company?s ability to manage costs. Already steel prices have started firming up and are expected to remain strong in the next two years. Despite the aggressive management of staff cost, operating profit margin are expected to remain stable at the current levels of 18%. The company has cut down its employee costs from 20% levels of costs 15.7% levels in 2008-09 and is expected to cut the cost as capacity increases along with the execution rate.
