Bharat Heavy Electricals Ltd (BHEL) is expected to benefit from a series of orders and its monopoly in the market, say brokerages after the company reported widening of losses in Q1. The state-run PSU has a buy call as completion of orders and orders in the pipeline are expected to boost its EBITDA.
The company reported a net loss of Rs 455.4 crore for the first quarter against a net loss of Rs 211 crore, mainly due to higher expenses. Revenue from operations rose 0.4% to Rs 5,486.9 crore against Rs 5,484.9 crore in the corresponding period of the preceding fiscal.
Nuvama says BHEL reported a muted set of results primarily due to subdued execution (broadly flat YoY) at Rs 5490 crore while higher other opex dragged operating profit margin to -9.8% (-3.1% in Q1FY25).
However, a healthy uptick in order inflows reported at Rs 13,400 crore (42% YoY) inched up the backlog to Rs 2.04 tn (7.2x FY25 sales). During the quarter, BHEL successfully commissioned 3x660MW North Karanpura STPS in Jharkhand, it added.
“We retain ‘BUY’ as the ongoing streak of fresh orders reaffirms our thesis of a thermal revival, wherein BHEL may benefit from a near monopoly (90%+ market share), implying it may win another 17GW over next two–three years. We factor in execution spill-over and cut FY26E/27E EPS by ~15%/5%, yielding a TP of Rs 335 (earlier Rs 360),” added Nuvama.
JM Financial continueS to maintain a BUY call with an unchanged targte price of Rs 278 (30x FY27EPS).
It expects the performance of BHEL to improve from the third quarter.
“Analysing the CEA’s projects monitoring reports, we expect performance of BHEL to improve from 3QFY26 given the profile of major projects under construction. The total order book stands at Rs 2,04,400 crore which is likely to increase to Rs 2,25,000 crore on March 2026,” said the brokerage.
“As execution of legacy projects are nearing completion and industry orders-mix improves, EBITDA margin is likely to improve gradually from 4.4% in FY25 to at least 11% in FY28,” added JM Financial.
CLSA has an underperform rating on BHEL with a target price of Rs 198.
The stock trades at 45x FY26CL P/E. CLSA said operational turnaround was expected after two years of backlog growth. However, execution disappointed with only 4% YoY growth in Q1, missing consensus.
However, thermal business orders peaked at 26.6 GW in FY25,it added.
Shares of BHEL slipped 4.11% to Rs 229.80 in early deals today. Market cap of the firm stood at Rs 79,913 crore.
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