BHEL's Strong Quarterly Performance Fuels Optimism
Bharat Heavy Electricals Ltd (BHEL), a Maharatna PSU, reported a robust June quarter that significantly surpassed Street expectations, sparking varied reactions among stock analysts. The company posted a sharp earnings surprise, with profit after tax (PAT) comfortably exceeding consensus figures, driven by a 40 percent year-on-year (YoY) revenue growth.
Key highlights from the quarter include a rebound in BHEL's Ebitda margin to 6.5 percent, marking an end to a multi-year streak of loss-making June quarters. This improvement signals enhanced execution and operating leverage. Furthermore, order inflows nearly doubled, surging by 99 percent YoY to Rs 26,700 crore, building on a low base. This substantial influx has expanded the order backlog to Rs 2.6 lakh crore, equivalent to 7.7 times its estimated FY26 sales.
Nuvama Institutional Equities noted that the commissioning of Yadadri Unit 3 and Patratu Unit 2 during the quarter, combined with a larger share of newer, higher-margin private projects entering the revenue-recognition phase, suggests BHEL’s turnaround could become more evident from H2FY27E onwards.
Brokerages Divided on BHEL's Valuation and Outlook
Despite the strong performance, analysts remain divided on the outlook for BHEL shares, which have rallied 67 percent over the past six months. Bloomberg data, compiled by Business Today, indicates analyst targets span a wide range from Rs 300 to Rs 540 against a closing price of Rs 440.10 apiece on Thursday.
Bullish Targets Highlight Growth Potential
- Nuvama Institutional Equities maintained a 'Buy' rating, raising its target price to Rs 530 from Rs 450.
- ICICI Securities reiterated its 'Buy' rating with a target price of Rs 520.
- IIFL Securities suggested an 'Add' call with a target price of Rs 502.
- 360 ONE Capital's Kunal Sheth holds the highest target price at Rs 537.
- Dolat Capital finds the stock worth Rs 525.
- Antique Stock Broking revised its target price to Rs 527, maintaining a 'Buy' rating.
Cautious Outlook Cites Valuation Concerns
- Macquarie maintained its 'Underperform' rating with an unchanged target price of Rs 315, emphasizing the sustainability of performance as a key concern.
- CLSA retained its 'Reduce' rating, though it raised its target price to Rs 306 from Rs 282, marking the lowest among brokerages.
- UBS reiterated its 'Neutral' rating with a target price of Rs 460.
- Morgan Stanley maintained its 'Overweight' rating, setting a target price of Rs 444.
- JPMorgan reportedly suggested that the sharp recent stock outperformance offers a good exit opportunity in the deeply cyclical stock, especially given that the best of the thermal power plant ordering cycle might be behind us.
What's Driving the Divergence?
The stark difference in analyst opinions stems from a debate between BHEL's undeniable operational improvements and strong order book versus concerns over its current valuation following a significant stock rally. While some brokerages foresee continued growth driven by execution and operating leverage, others caution that the rapid appreciation has left valuations stretched, necessitating a more conservative approach.