BHEL share price: Antique says 10% fall on China buzz unjustified; here's why

Antique Stock Broking on Friday said the sharp correction in Bharat Heavy Electricals Ltd (BHEL) shares following media reports on a possible easing of curbs on Chinese firms was unjustified. The brokerage maintained a 'Buy' rating on the stock with a target price of Rs 349. 
A few media reports earlier suggested that a high-level committee had recommended removing five-year-old restrictions that had largely kept Chinese power equipment manufacturing firms, generation companies and transmission and distribution players out of government contracts. 

BHEL shares plunged 10.34 per cent to settle at Rs 272.30 apiece on Thursday. Antique said the news led to a sharp correction in the share prices of most listed power equipment manufacturers, with BHEL being the most adversely impacted due to its dominance in India’s thermal power plant manufacturing.

“We find the news irrelevant for BHEL and reaction to the stock unjustified,” Antique said.

Antique said a blanket regulatory act of this kind was extremely unlikely, particularly in an environment of global security uncertainty, given the strategic nature of the power sector. The brokerage said imports of Chinese boiler turbine generator equipment had stopped in FY13 due to concerns around quality, poor servicing and lifecycle costs.

It added that even if Chinese boiler turbine generator imports were hypothetically allowed, Indian developers would be extremely cautious on imports.

Antique said BHEL’s leadership position remained strong. Of the 35,550 MW of power plants under construction, BHEL was executing 32,230 MW. In terms of units, BHEL was working on 40 out of the 47 units under construction, with L and T handling the remaining units.

The brokerage attributed this to trust, quality and cost competitiveness and said BHEL was likely to continue dominating the thermal power plant business.

Antique noted that India saw large-scale imports of Chinese power equipment, particularly boiler turbine generators, during FY08 to FY12. During this period, orders for nearly 40,000 MW were placed with Chinese suppliers such as Shanghai Electric, Dongfang Electric Corporation and Harbin, along with Korean suppliers including Doosan and Toshiba.

Despite this, Antique said BHEL reported peak order inflows during FY08 to FY11 and operated at full capacity. The brokerage added that given the current regulatory environment and increased awareness of lifecycle costs among power plant owners, the cost differential between Indian and Chinese manufacturers would not be significant. It also said any import relaxation would be subject to conditions, delaying any meaningful impact.

Antique highlighted that Bharat Coal Gasification and Chemicals Ltd, a joint venture between Coal India Ltd and BHEL, awarded BHEL a major contract for a coal gasification and raw syngas cleaning plant for a 2,000 tonnes per day ammonium nitrate project in Odisha. The project was expected to be completed within 42 months, followed by operations and maintenance for 60 months.

The total consideration for the contract was about Rs 5,400 crore, excluding GST. Antique said coal gasification was a futuristic technology and a core part of BHEL’s growth engine, with potential for five to six projects, adding that BHEL was the only Indian company with proven capability in this area.

Antique said BHEL was positioned to deliver a 2.5 times increase in earnings in FY26, followed by a three times rise in profit after tax by FY28, supported by a Rs 2,20,000 crore order book and a strong order pipeline.