My analysis about BHEL tells that it'll remain to be a healthy and growing company, and it still has huge potential given the fact that India still needs a huge capacity expansion in power infrastructure space. Since BHEL is a PSU company, and known for its quality of products, it'll continue to enjoy the status of preferred suppliers for many large PSU power generation companies like NTPC, etc.
My independent Intrinsic Valuation tells the following:
1. Graham's hidden bond value of Rs 188 per share
2. Historical P/E and average EPS based value of Rs 460 per share
3. Average P/B and P/E based modified Graham's number gives a value of Rs 423
4. Earning power value, assuming a constant growth rate of 2% YoY in future earnings, and using last 3 years' FCFF gives a value of Rs 167
5. Half PEG based bargain value of Rs 377, given 24% CAGR in last 5 years EPS
Effectively, with 30% Margin of safety, the fair purchase price for BHEL stock comes at Rs 226. My average purchase price is Rs 220 and BHEL is currently about 15% of my concentrated portfolio (note that cost vise its lesser, but due to recent rally and current price of Rs 250, the contribution of BHEL in my portfolio has increased).
I've been purchasing BHEL since the beginning of 2012. I entered at higher prices while I was still learning, realized the mistake and exited at cost, and then analyzed and entered again when the stock was getting battered. Here is my journal of investing in BHEL:
When will I sell the shares of BHEL? Well, not until I see the business deteriorating, and I'll continue to hold or even increase my exposure when I have more cash to invest. For now, at least for next one year when I'll re-analyze the business, its time to just hold and enjoy the dividend income :-)
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