Bharat Heavy Electricals Ltd (BHEL) share price declined nearly 5% in early trade on Thursday after the company's weak order inflows disappointed brokerages. The PSU stock dropped as much as 4.81% to Rs 441.20 apiece on the BSE.
BHEL reported strong net profit jump of 120.2% year-on-year (YoY) to Rs 810 crore in the second quarter of FY27, while its revenue grew 23.8% YoY to Rs 9,300 crore.
At the operational level, EBITDA in Q2FY27 increased 76.7% YoY to Rs 1,026 crore, while EBITDA margin expanded to 11% from 7.7% YoY. The recovery in operating profitability was driven by the execution of better-priced orders.
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However, the company's quarterly order inflow plunged significantly. During the September quarter, BHEL's order inflow dropped to Rs 4,000 crore from Rs 21,900 crore, amid absent thermal orders.
Its order book grew 17.3% YoY to Rs 2.58 lakh crore.
Brokerage firm CLSA maintained ‘Underperform' rating on BHEL shares with a target price of Rs 351 apiece, implying a downside of more than 24% from Wednesday's closing price. It believes the entry of Chinese suppliers, JSW Toshiba, L&T and Thermax into its core thermal equipment segment question its market dominance and its backlog looks to have peaked, while the stock is pricing in a lot more.
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It raises FY27-29CL PAT estimates by 10-11%. BHEL share price is up 8% over the past month, likely in anticipation of a strong Q2 despite lack of orders. Hence, CLSA believes the strong Q2 is priced in, while it is expensive at a 39x FY28CL PE on a structural peak in its power orders.
JPMorgan noted that the very weak order inflows in Q2 was surprising. It cautioned on past track-record of unprofitable execution.
It maintained an ‘Underweight' rating on BHEL and hiked the target price to Rs 262 from Rs 220 apiece. The target price implies a downside potential of more than 43% from Wednesday's close.
Jefferies maintained an ‘Underperform' call but raised that target price to Rs 335 from Rs 270 earlier. It said that the sustainability of improvement in gross margins would be key.
Key concern has been the aggressive industry pricing on power equipment seen till end CY24, Jefferies said, while its remains concerned on sustainability of gross margin improvement till H2FY28.
At 10:20 AM, BHEL share price was trading 4.42% lower at Rs 443.00 apiece on the BSE.
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