BHEL has witnessed a sharp surge in order inflows over the past three years, with FY25 order inflow at Rs 923 billion, up from Rs 230 billion in FY23. For FY26, ICICI Securities expects inflows to exceed Rs 900 billion, supported by Rs 353 billion already announced and Rs 400 billion where BHEL is the lowest bidder. This would take the order book to Rs 2.4 trillion, translating into an 8x book-to-bill ratio, ensuring multi-year revenue visibility.
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ICICI Securities Report
ICICI Securities maintains 'Buy' rating on Bharat Heavy Electricals Ltd. with a target price of Rs 370, implying an upside of 33% from current market price of 278.
The brokerage cites improving fundamentals, strong order inflows, and execution ramp-up as key drivers for the upgrade.
BHEL has accumulated a strong orderbook in last three years but execution has been slow. Order inflow in FY24/25 was Rs 780 billion/ Rs 920 billion (vs average order inflow of Rs 210 billion between FY19-23), respectively.
The brokerage expects FY26E order inflow to be more than Rs 900 billion as it has already announced order inflow of Rs 353 billion and is L1 in ~Rs 400 billion (our estimate).
The brokerage also believes execution ramp up was due to teething issues for new built ups. The issues are ironing out and it expects sharp execution ramp up in FY27E. The new built-up pipeline (yet to be awarded) remains strong at ~20GW Moreover, India may need coal and nuclear plants considering retirement of coal-based plants to meet the base load demand.
All in all, ICICI Securities believes fundamentals are improving; reiterates Buy with a revised target price of Rs 370 as it rolls over to FY28E.
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