Brokerages retained bearish ratings on BHEL, citing weak order inflows, concerns over margin sustainability and valuations, despite improved profitability in the second quarter of FY27. The current market price of
JPMorgan maintained its Underweight rating but raised its target price to Rs 262 from Rs 220, implying 43.5% downside from the current market price of Rs 464. The brokerage described the profit and loss performance as strong but said very weak quarterly order inflows were surprising. BHEL's past record of unprofitable execution warranted caution, the brokerage said.
Jefferies retained underperform and increased its target price to Rs 335 from Rs 270, indicating 27.8% downside. While gross margins improved, their sustainability remained key, said the brokerage citing aggressive industry pricing for power equipment until the end of calendar 2024 as a concern. The brokerage also questioned whether margin improvements could be sustained until the second half of FY28.
CLSA maintained underperform with a target price of Rs 351, implying 24.4% downside. It said faster execution drove profit, while inflows weakened. Although BHEL had built its backlog, growth had halved and the pipeline had peaked, CLSA said. The brokerage described valuations as frothy, driven by momentum, while warning that the company's core market was peaking, keeping its stance on BHEL cautious.
BHEL Q2 Results
BHEL on Wednesday reported a two-fold jump in consolidated net profit to Rs 821 crore for the September quarter, driven by higher income from key business verticals such as power and industry. The company's consolidated net profit rose to Rs 821 crore from Rs 375 crore in the year-ago quarter, while revenue increased 23.8% to Rs 9,300 crore from Rs 7,512 crore year-on-year.
Ebitda surged 76.7% year-on-year to Rs 1,026 crore from Rs 581 crore. Ebitda margin expanded to 11% from 7.7% in the corresponding quarter last year, indicating an improvement in operating profitability.
The company's performance also exceeded Street estimates across key financial parameters. Net profit was above the estimate of Rs 756 crore, while revenue surpassed expectations of Rs 8,319 crore. Ebitda came in higher than the estimate of Rs 843 crore, and Ebitda margin beat the expected 10.1%.
BHEL is India's largest engineering and manufacturing enterprise in the energy and infrastructure sector.
BHEL Shares After Q2 Results
Shares of state-owned BHEL on Wednesday surged nearly 5% after the state-owned firm reported a two-fold jump in consolidated net profit for the September quarter. The stock jumped 4.86% to Rs 463.50 on the BSE. During the day, it climbed 4.88% to Rs 463.60 -- the 52-week high level. At the NSE, the stock rallied 4.89% to end at Rs 464.
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