The company's principal activity is to manufacture wide range of Earth moving products, Railway products and Defence products. The Heavy Earth moving products caters to the core sectors of mining, irrigation, steel, cement and power plants. The company is a public sector undertaking, where in the government holds 61 per cent of the stake under the ministry of defence.

Business Scenario
The total revenue of the company is skewed towards mining and construction. The revenues from this segment accounts to 63 per cent of the total sales turnover. The rest is from the defence segment, which is around 32 per cent of the revenues and the remaining from railways.
The company is almost a monopoly in the Indian earthmoving market. It commands a strong 70 per cent market share in the domestic earthmoving equipment industry. In the last few years, the company has supplied to many countries in the export market too.
The company’s vision is to achieve a turnover of Rs. 5000 crores by FY2014. In FY06, the company recorded revenues of Rs. 2055 Crores. This will mean a doubling in the revenues within a time of seven years from now. Taking this into consideration, the company has unveiled a plan to take up a number of new projects and products with enhanced allocation of resources. It is planning to allocate around 2 per cent of its turnover in the coming years to develop these capabilities. This strong R&D focus in an industry which is expected to witness enhanced investments made us look into its valuations.
The order book back log of the company stands at Rs. 2000 Crores and the company has an order book pipeline of another Rs. 300 crores. This is expected to keep the revenue stream steady. However, there have been instances of supply chain imbalances, which has impacted to revenues of the company negatively.
For instance, the December quarter witnessed the top line of the company decline by 1.9 per cent to Rs. 544 crores as compared to Rs. 551 crores in the previous corresponding quarter. This we believe is temporary and seasonal in nature. In order to avoid these seasonal supply chain imbalances, the company has proactively entered into various sourcing agreements. We expect the imbalances to fade away in the near to medium term future.
On the macro environment front, there is a change in mining policy, which is expected to be announced. The government is planning to enhance its thrust on the Indian minerals segment by encouraging more FDI. This is expected to be favorable for BEML, taking into consideration its strong market presence.

As mentioned earlier, the top line of the company dipped in 3QFY07. The bottom line too, declined by 5.1 per cent on a YoY basis to Rs. 52.9 crores as compared to Rs. 55.8 crores in the previous corresponding quarter. On a historical EPS of Rs. 47, the scrip is currently trading at PE of 23x. We expect the company to witness a growth of 28 per cent in its EPS for FY07. Taking into consideration the widening growth opportunities, we expect the stock to provide good returns.

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