Bharat Heavy Electricals Ltd (BHEL) shares are experiencing a bull run, having risen 60% in three months and reaching a 52-week high. However, despite the strong performance and stellar Q4 earnings, brokerage Nuvama has issued a revised, lower price target for the public sector undertaking (PSU) stock.
Nuvama has reduced BHEL's price target to Rs 485 per share, down from an earlier projection of Rs 525. This decision comes even after BHEL reported a remarkable 156% increase in net profit for the January-to-March quarter (Q4 FY26), reaching Rs 1,290 crore compared to Rs 504 crore in the same period last year.
Why the Price Target Cut?
The brokerage explained that the cut in its FY27E/28E earnings per share (EPS) by 7% aligns with management guidance, which sets execution at 2.7 times FY26 sales. While BHEL's order backlog has grown to Rs 73,900 crore, Nuvama valued the stock at 45 times FY28E EPS to arrive at the new target.
Another brokerage, ICICI Securities, also noted a potential delay in the execution of BHEL's current order backlog as a key risk affecting margins, assigning a price target of Rs 460 for the PSU giant.
Strong Financials and Market Performance
In addition to the impressive profit growth, BHEL's revenue from operations surged 37% year-on-year (YoY) in Q4 FY26, reaching Rs 12,310 crore compared to Rs 8,993 crore in the corresponding quarter of the previous fiscal year. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose to Rs 1,753 crore in Q4, up from Rs 831 crore in Q4 FY25, with EBITDA margins expanding to 14.24%.
The BHEL stock, a multibagger, has seen significant gains, climbing 410% over the last three years and zooming 463% in five years. On Wednesday, the stock closed 1.85% higher at Rs 408.45, with a market capitalization of Rs 1.42 lakh crore. Technical indicators show the stock is currently overbought, with a Relative Strength Index (RSI) of 71.1. It also trades above its 5-day, 10-day, 20-day, 50-day, 100-day, and 200-day simple moving averages, indicating strong price action.
Management Outlook
The company's management has guided for over 15% revenue growth, more than 28% EBITDA margin, and a capital expenditure of Rs 1,200 crore.