BHEL shares rally to hit new 52-week high; analysts see more upside left

JM Financial reiterates its positive stance on Bharat Heavy Electricals Ltd (BHEL), based on projected earnings per share for March 2028. The firm cites robust expectations for BHEL’s execution capabilities and margin resilience as India’s energy requirements evolve. India’s coal-fired generation capacity currently stands at 220GW and is anticipated to rise to 300GW by 2035.

India will require coal-fired power generation capacity of 340GW by 2047, implying a net addition of 40GW. Since about 50GW of plants—mostly with sub-critical technology—would exhaust their useful life by 2035 and another 88GW by 2047, India would need 170–180GW of new projects to maintain its installed base. 

The average age of the coal-fired fleet is 16 years. About 50GW of operating plants will exhaust their useful life by 2035 and another 88GW by 2047. India will need to order 170–180GW of new thermal power projects—first around 2029/30 and then 2035—to maintain its targeted installed base.

The report notes that in January 2023, the Central Electricity Authority (CEA) advised no retirement or re-purposing of coal-based power stations before 2030, considering expected energy demand and capacity availability. Currently, 368 coal-based thermal units with total capacity of 76GW have a unit size less than 500MW and operate on sub-critical technology, which would require replacements.

JM Financial observes that the 340GW of installed coal-fired capacity by 2047 assumes 100GW of nuclear and over 1,500GW of renewables. However, only 6,600MW of nuclear capacity is under construction and targeted for completion by 2029–30. Industry commentary suggests that 100GW by 2047 seems ambitious and may lift the targets for thermal power additions.

The report concludes: Renewable intermittency, limited utility-scale storage capacity, and rising evening peak demand make thermal generation critical to maintaining grid frequency and stability. JM Financial remains optimistic about BHEL’s performance and maintains ‘buy’ with a target of Rs 363 based on March 2028E EPS.

Amid the positive report, shares of BHEL jumped nearly 3 per cent to Rs 305.85 on Wednesday, hitting its new 52-week high, with a total market capitalization of Rs 1.05 lakh crore. The stock had settled at Rs 296.96 on Tuesday. The stock has gained nearly 75 per cent from its 52-week lows at Rs 176 hit 10 months ago.

Nuvama Institutional Equities expects Q3 to see the lingering impact of legacy low margin projects (Patratu and Ennore) which may keep results/margins depressed. However Q4FY26 onwards, it sees the newer projects enter the sale recognition phase which will see a turnaround by FY27. Nuvama also has a 'buy' rating on BHEL with a target price of Rs 353.

BHEL has accumulated a strong order book in the last three years but execution has been slow. Order inflow (OI) in FY24/25 was Rs 78,000/ Rs 92,000 crore, respectively, said ICICI Securities in its report in December. It sees FY26E OI to be Rs 90,000 crore as it has already announced OI of Rs 35,300 crore and is L1 in Rs 40,000 crore, it said, maintaining a 'buy' call.

"We believe the execution ramp up was due to teething issues for new built ups. The issues are ironing out and we expect a sharp execution ramp up in FY27E. The new built-up pipeline remains strong at 20GW. India may need coal and nuclear plants considering retirement of coal-based plants to meet the base load demand. We believe fundamentals are improving," it added with a target price of Rs 370.