BHEL: Execution ramp up ahead? ICICI Securities ups target price

ICICI Securities has maintained a 'Buy' rating on PSU stock Bharat Heavy Electricals Ltd (BHEL), with a revised target price of Rs 370 from Rs 324 earlier, rolling over to financial year 2028 estimates. The domestic brokerage noted that BHEL had accumulated a strong order book over the past three years, though execution had been slow. Order inflows were Rs 78,000 crore in financial year 2024 and Rs 92,000 crore in financial year 2025, compared with an average of Rs 21,000 crore between financial years 2019 and 2023. 

ICICI Securities expected financial year 2026 order inflows to exceed Rs 90,000 crore, citing already announced orders of Rs 35,300 crore and BHEL being the lowest bidder for approximately Rs 40,000 crore in additional projects.

ICICI Securities highlighted that the slower execution in recent years was largely due to initial challenges at new sites, which were gradually being resolved. The brokerage anticipated a sharp ramp-up in execution from financial year 2027 onwards. The new built-up pipeline, yet to be awarded, remained robust at around 20 gigawatts. Additionally, India’s potential requirement for coal and nuclear plants—given the retirement of coal-based plants to meet base-load demand—was expected to further support BHEL’s business.

The brokerage observed that order inflows had strengthened for the third consecutive year, rising from Rs 23,000 crore in financial year 2023 to Rs 80,000 crore in financial year 2024 and Rs 92,300 crore in financial year 2025. 

ICICI Securities revised its order inflow estimate to above Rs 90,000 crore, driven by an order announcement of Rs 41,000 crore (including first-half order inflows and new orders) and BHEL being the preferred bidder for two thermal and coal gasification projects worth approximately Rs 40,000 crore. The total order book at the end of financial year 2026 was projected at Rs 2.4 lakh crore, implying an order-to-bill ratio of eight times.

ICICI Securities expected execution to pick up from the second half of financial year 2026, with a sharp improvement in financial year 2027. Thermal orders won in the last two years accounted for nearly 80 per cent of the current order book. The brokerage noted that initial teething issues were being resolved at almost all new sites.

BHEL’s non-thermal portfolio was also scaling steadily, supported by industry and transmission projects that consistently exceeded Rs 150 billion in annual order inflows. First-half financial year 2026 order inflows stood at Rs 93 billion, with BHEL as the lowest bidder for an additional Rs 40 billion. The company remained a key beneficiary of nuclear capacity additions, with near-term opportunities of 2.8 gigawatts, while additional potential emerged from railways (Rs 250 billion), coal gasification, defence, and hydro/pumped storage projects.

Looking further ahead, ICICI Securities highlighted the increasing likelihood of new coal capacity beyond 2032. Earlier, NTPC Ltd had indicated plans to add over 13 gigawatts between 2032 and 2037. Media reports also suggested that the National Institution for Transforming India (NITI Aayog) was considering increasing India’s coal capacity target to 420 gigawatts by 2047. Nuclear capacity demand was expected to remain strong, aligned with the 100-gigawatt target by 2047, supporting BHEL’s long-term prospects.