Date:06/05/2005 URL: http://www.thehindubusinessline.com/2005/05/06/stories/2005050602021500.htm

Back Strong order book propels Alstom Projects

Jayanta Mallick

Kolkata , May 5

THE Alstom Projects stock showing its strength in power play closed higher on Thursday with substantial volumes. According to analysts, the stock has been ruling steady in the last one month or so powered by its bulging order book position.

After clinching the Rs 746-crore order for electro-mechanical equipment for (8x250 MW, ) Subansiri Lower Hydroelectric Project from NHPC last month, the stock's valuation has been reset on an upward mode. At today's closing price of Rs 232.75, it traded at around 32.5 times its 2004-05 earnings per share of Rs 7.15.

According to Mr Ritesh Nair of Anagram stockbroking, among the compatriots in the power equipment and engineering services sector, this is the highest market valued stock. At today's closing prices, ABB had a P/E multiple of 32, Siemens 31 and BHEL 32.

According to the head of equities at a private bank, the sector players are generally getting higher rating from the market in accordance with the order book positions and inherent strength. "However, BHEL relatively lower valuation despite bigger orders backlog (around Rs 3,200 crore against Alstom Projects' Rs 1,600 crore) can only be explained by difference in perception over efficiency and management control," he added.

Additional impetus for higher valuation is the French major's strategy to outsource from Indian subsidiary's Vadodara plant for global operations. According to Mr Philippe Jouber, President of Alstom's Power Turbo Systems and Power Environment Sectors, "We have been investing (more) in our Baroda factory in order to develop it into a world hub for hydro projects". To take advantage of the unfolding opportunities in India, Alstom has set up a plant engineering centre near the Capital.

According to Mr Gul Tekchandani, an investment strategist, the huge power requirement in the country, strong fundamentals, improving results, strong dividend yield make this virtually debt-free company a compelling long-term bet.