BHEL shares: Uptick in defence orders to support BHEL stock? Q2 earnings, price targets, key risks & more 

Q2 earnings of Bharat Heavy Electricals Ltd's (BHEL) have come above estimates, led by better-than-expected margin performance. Motilal Oswal in its earnings review said revenue growth was led by a strong order book, which stood at Rs 74,600 crore. The brokerage expects an uptick in defence orders for BHEL in the coming quarters. 

"We expect BHEL to remain a key beneficiary of the same, with key focus areas being from naval, EW systems, artillery systems, platform orders, Kavach, exports, et al. We expect BHEL’s revenue to grow at 19% CAGR over FY24-27, driven by improved market share on account of enhanced wallet share and improved indigenized offerings," said Motilal Oswal. 

It has maintained its estimates and continues to value the company at 35 times two-year forward earnings. The brokerage reiterated its buy call with a price target of Rs 360.

The state-owned firm reported a profit of Rs 96.7 crore in the September 2024 quarter against a loss of Rs 58.3 crore in the September 2023 quarter. BHEL stock gained 10% intra day on Monday to Rs 238.60 on BSE. Market cap of the firm climbed to 79,269 crore.

EBITDA came at Rs 275 crore in the last quarter against Rs 153.3 crore loss in the corresponding quarter of the previous fiscal. Revenue rose 28% to Rs 6,584 crore in Q2 against Rs 5,125.29 crore in the year ago period.

However, Motilal Oswal finds a slowdown in order inflows from the defence and non-defence segments, increased competition, further delays in finalization of large tenders, a sharp rise in commodity prices as key risks to its projections.

"The delays in payments from ministry of defence can adversely impact our estimates on revenues, margins, and cash flows," said the brokerage. 

JM Financial has assigned a price target of Rs 361 to the BHEL stock on October 17. 

"As of YTDFY25, BHEL has received orders for 10 GW of projects with varying scopes amounting to INR 351bn. 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 (40x FY26EPS) supported by healthy ordering, improving execution and the benefit of operating leverage," said JM Financial.