BHEL Q2 Review: 'Buy' Maintains ICICI Securities, Sees 32% Upside — Here's Why

BHEL's revenue in Q2 FY26 grew 14% YoY to Rs 75 billion with industrial/power segments’ revenue growing by 18%/13% YoY to Rs 18.3 billion/Rs 56.7 billion. Gross margin stood at 31% (vs 33% YoY). Ebitda stood at Rs 5.8 billion with margin of 7.7% (+360 bps YoY)..NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..ICICI Securities Report.Bharat Heavy Electricals Ltd. saw a pick-up in execution with revenues increasing 14% YoY to Rs 75 billion. Ebitda stood at Rs 5.8 billion with margins of 7.7% (+360 bps YoY). PAT grew 3.8x YoY to Rs 3.6 billion. Note, the company is still in early stages of executing its burgeoning order book of Rs 2.2 trillion (vs Rs 1.6 trillion YoY). As a result, we expect its scale of operations to improve further from hereon. Better pricing in new orders should lead to a gradual increase in gross margins and profitability. BHEL reported order inflow of Rs 350 billion in H1 FY26 (Q2 saw order inflow of Rs 219 billion). Its industrial segment has seen a sharp increase in order inflow in H1 to Rs 94 billion (3.4x YoY). The order outlook for BHEL remains strong with ~30GW of coal-based capacity in the planning stage. We expect the company to report order inflow of ~Rs 700 billion in FY26E. We maintain Buy with target price of Rs 324 (35x FY27E EPS)..Outlook and valuationWe estimate 50GW of coal-based capacity to be more than 40 years old by FY32. India’s peak demand is likely to be 375GW by FY32, at 6% CAGR or 330GW at 5% CAGR (as per National Electric Plan, 2022). Anticipating additional peak demand, the government too is looking to add 75GW of storage and 50GW of thermal. Storage is still at a nascent stage with ~20% operational capacity >40 years by 2032. In our opinion, India may, therefore, need to build a stronger arsenal of thermal power plants to ensure smooth energy transition. Our conviction on the need to add more coal-based thermal capacity was validated when India’s Minister of Power mentioned the need to have 80GW of thermal capacity under construction in order to meet India’s power needs in the future. Thus, we believe India may need to add 5GW of coal-based thermal capacity every year for the next 10 years. We maintain Buy on BHEL with a target price of Rs 324 (unchanged), valuing the stock at 35x FY27E EPS of Rs 9.2/share. .Risks: Delay in order inflow in FY26; andno major improvement in execution of slow-moving orders..Click on the attachment to read the full report:.'Buy' Five Star Business Shares Maintains Motilal Oswal Despite Soft Q2 On Improved Growth Visibility.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

BHEL Q2 Review: 'Buy' Maintains ICICI Securities, Sees 32% Upside — Here's Why

ICICI Securities maintains Buy on BHEL with an unchanged target price, valuing the stock at 35 times FY27E earnings per share.

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