BHEL shares headed for 45% upside? Brokerage JM Financial believes so

Domestic brokerage firm JM Financial and others continue to remain bullish on the stock and see up to 45 per cent in Bharat Heavy Electricals Ltd (BHEL) despite the recent challenge from Larsen & Toubro (L&T) to the company in the thermal power space. They believe that the PSU player has enough possibilities of order inflows.

L&T has emerged as the lowest price bidder in NTPC’s bulk tender for the main plant packages for 2X800 MW Gadarwara, 3X800 MW Telangana, and 3X800 MW Nabinagar marking its re-entry in thermal business after 2019. Prices quoted by L&T (INR 65-70 mn/MW, derived) are marginally lower than BHEL’s prices, the only next bidder, said JM Financial.

"This indicates sufficiency of market opportunities and focus on margins in now the oligopoly market (Since beginning of FY24, BHEL has secured 20 GW of orders on a single-bidder basis). As of YTDFY25, BHEL has received orders for 10 GW of projects with varying scopes amounting to Rs 35,100 crore," said JM Financial.

Before trading flat, shares of BHEL dropped 3 per cent to Rs 246.65 on Friday. However, the stock rebounded and traded near its previous close at Rs 254.05, with a total market capitalization of Rs 88,500 crore.

JM Financial expects BHEL to clock a net loss of Rs 85 crore for the September 2024 quarter, with an operational loss of Rs 68.7 crore. Revenues may increase in single digits on a sequential basis to Rs 5,875.4 crore. Improvement in sales due to healthy order book and ebitda may come in better due to operating leverage & better orders’ mix, it said.

With 8 GW of active tenders and 39 GW of projects under clearances, we expect healthy order inflows for BHEL going forward. We continue to maintain 'buy' on the stock with a target price of Rs 361 (40 times FY26EPS) supported by healthy ordering, improving execution and the benefit of operating leverage, added JM.

Kotak Institutional Equities sees a 21 per cent YoY rise in revenue at Rs 6,202 crore, with an ebitda loss of Rs 128.6 crore. It may report a net loss of Rs 201.2 crore. "We see improvement in revenues, driven by power and industrial segments. We expect negative Ebitda margin in a seasonally weak quarter and factor in gross margin at FY24 full-year levels," said Kotak.

Kotak Institutional Equities has a 'sell' rating on BHEL, pegging its fair value at Rs 100, suggesting a downside of 60 per cent in the stock. On the other hand, Antique Stock Broking has a 'buy' rating on BHEL with a target price of Rs 352 on the stock.