BEML to gain from higher Coal India output: IDFC

We recently met the management of BEML. Robust revenue growth in mining segment (~58% of revenues) — Coal India’s target of doubling its production to ~1bn tonnes (15% CAGR) in next five years — would mandate higher investments in commercial vehicles and heavy equipment.

Coal India, in its commentary, has stated its intent to spend R1,500-2,000 crore annually on machinery procurement including heavy equipment, dumpers, etc — segments where BEML is the market leader.

BEML is focussing to generate higher revenues from spares and parts (~27% of total revenues) – typically a higher-margin business. BEML has the prequalification to supply spares and parts to Coal India.

BEML has a strong order backlog of R2,300 crore in the Metro segment, which indicates 100% utilisation for the existing capacity till FY18. BEML is well placed to receive Metro orders in Delhi/Kolkata/Jaipur/Bangalore metro project given its expertise and experience in the space.

BEML is also exploring manufacture of medium speed trains — a focus area for the incumbent railway minister.

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