Shares of state-owned power equipment producer BHEL rose 16.6 percent on Thursday, as expectation grew that the government may restrict the import of cheaper Chinese alternatives following an over month-long standoff between Indian and Chinese troops in the Ladakh region that claimed the lives of at least 20 Indian soldiers earlier this week. The telecom ministry’s order to state-owned operators BSNL and MTNL to ban all Chinese equipment further boosted sentiment.
BHEL draws 75 percent of its revenue from the power segment and the company will be the biggest beneficiary if there is a ban on Chinese equipment, analysts said the awarding run-rate for its power equipment had fallen from an annual 15 GW to 4-5 GW currently as a result of imported Chinese equipment as well as due to surplus power capacity in India. “BHEL has been losing market share to Chinese competitors over the last decade. A decision to stop Chinese firms from bidding will ensure large market share gains for BHEL,” said Abhimanyu Sofat, head of research at IIFL Securities.
The stock fell nearly 75 percent between April 2019 and March 2020 on weak power demand, delay in new orders, and a deteriorating receivables position, especially from state governments. It has, however, risen 60 percent since March 27.
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