BHEL stock: Nuvama calls FY26 a clean-up year, shares target, key triggers
BHEL reported a strong turnaround in Q2FY26, posting a profit after tax (PAT) of roughly Rs 375 crore against Rs 106 crore a year earlier and a loss in the previous quarter.
- Oct 30, 2025,
- Updated Oct 30, 2025 8:03 AM IST
Nuvama Institutional Equities retained its ‘Buy’ rating on Bharat Heavy Electricals Ltd (BHEL), calling FY26 a “clean-up year” as legacy low-margin projects near completion. The brokerage expects a sharp margin rebound in FY27 as execution of new, higher-margin orders gathers pace and operating leverage benefits start to play out.
The brokerage cut its FY26E and FY28E earnings per share estimates by 22 per cent and 16 per cent, respectively, to reflect a lower FY26 operating margin forecast of 6.9 per cent (earlier 8.4 per cent) and the likely impact of the Eighth Pay Commission in FY28. Nuvama has raised its target price to Rs 353 (from Rs 335), maintaining a 25x FY28E earnings multiple.
BHEL reported a strong turnaround in Q2FY26, posting a profit after tax (PAT) of roughly Rs 370 crore against Rs 106 crore a year earlier and a loss in the previous quarter. Ebitda rose 2.1x year-on-year, 31 per cent above consensus estimates, supported by healthy margins of 7.7 per cent. The improvement was aided by potential write-backs in other operating expenses—provisions stood at Rs 10 crore in H1FY26 versus Rs 170 crore a year earlier—and foreign exchange gains of Rs 270 crore (versus Rs 86.70 crore in Q2FY25).
Revenue for the quarter rose 14 per cent year-on-year, about 6 per cent below consensus, with the gross margin moderating to 30.6 per cent from 32.7 per cent. The PAT margin improved to 4.9 per cent from 1.5 per cent a year ago. Order inflows stood at Rs 22,000 crore, down 30 per cent year-on-year on a high base, taking the order book to Rs 2.2 lakh crore —equivalent to 7.8 times FY25 revenue.
In the power segment, revenue increased 12.9 per cent year-on-year, with EBIT margin improving to 10.5 per cent from 6.7 per cent in Q1FY25. The industrial segment reported an 18 per cent increase in revenue and an EBIT margin expansion to 15.3 per cent from 13.9 per cent.
During the quarter, BHEL commissioned 1,630 MW across major projects, including Yadadri TPS, Khurja STPP, and Punatsangchhu-II HEP. Most low-margin projects are expected to conclude in FY26, setting the stage for a pickup in execution of newer orders from FY27 and potential cash flow improvement, with contract assets at Rs 290.6 billion at the end of Q2FY26.
Nuvama expects Ebitda margins to recover to around 14 per cent by FY27–FY28 (from 4.4 per cent in FY25), supported by operating leverage from the Rs 2.2 lakh crore order book—80 per cent of which is power-related—and an additional 25–30 GW of projects in the pipeline over the next 18–36 months.
Key variables to watch over the next two years include timely execution of the current backlog, growth in non-thermal businesses such as railways, defence, and hydrogen, and the successful closure of legacy projects.
Nuvama Institutional Equities retained its ‘Buy’ rating on Bharat Heavy Electricals Ltd (BHEL), calling FY26 a “clean-up year” as legacy low-margin projects near completion. The brokerage expects a sharp margin rebound in FY27 as execution of new, higher-margin orders gathers pace and operating leverage benefits start to play out.
The brokerage cut its FY26E and FY28E earnings per share estimates by 22 per cent and 16 per cent, respectively, to reflect a lower FY26 operating margin forecast of 6.9 per cent (earlier 8.4 per cent) and the likely impact of the Eighth Pay Commission in FY28. Nuvama has raised its target price to Rs 353 (from Rs 335), maintaining a 25x FY28E earnings multiple.
BHEL reported a strong turnaround in Q2FY26, posting a profit after tax (PAT) of roughly Rs 370 crore against Rs 106 crore a year earlier and a loss in the previous quarter. Ebitda rose 2.1x year-on-year, 31 per cent above consensus estimates, supported by healthy margins of 7.7 per cent. The improvement was aided by potential write-backs in other operating expenses—provisions stood at Rs 10 crore in H1FY26 versus Rs 170 crore a year earlier—and foreign exchange gains of Rs 270 crore (versus Rs 86.70 crore in Q2FY25).
Revenue for the quarter rose 14 per cent year-on-year, about 6 per cent below consensus, with the gross margin moderating to 30.6 per cent from 32.7 per cent. The PAT margin improved to 4.9 per cent from 1.5 per cent a year ago. Order inflows stood at Rs 22,000 crore, down 30 per cent year-on-year on a high base, taking the order book to Rs 2.2 lakh crore —equivalent to 7.8 times FY25 revenue.
In the power segment, revenue increased 12.9 per cent year-on-year, with EBIT margin improving to 10.5 per cent from 6.7 per cent in Q1FY25. The industrial segment reported an 18 per cent increase in revenue and an EBIT margin expansion to 15.3 per cent from 13.9 per cent.
During the quarter, BHEL commissioned 1,630 MW across major projects, including Yadadri TPS, Khurja STPP, and Punatsangchhu-II HEP. Most low-margin projects are expected to conclude in FY26, setting the stage for a pickup in execution of newer orders from FY27 and potential cash flow improvement, with contract assets at Rs 290.6 billion at the end of Q2FY26.
Nuvama expects Ebitda margins to recover to around 14 per cent by FY27–FY28 (from 4.4 per cent in FY25), supported by operating leverage from the Rs 2.2 lakh crore order book—80 per cent of which is power-related—and an additional 25–30 GW of projects in the pipeline over the next 18–36 months.
Key variables to watch over the next two years include timely execution of the current backlog, growth in non-thermal businesses such as railways, defence, and hydrogen, and the successful closure of legacy projects.