BHEL shares: After 110% rise in a year, brokerage sees more steam left in the multibagger stock

Bharat Heavy Electricals Ltd (BHEL) has been a shining stock on Dalal Street despite its mixed performance in the last few quarters. The state-run power generation equipment manufacturer has delivered multibagger returns to the investors and analysts at Nuvama see more legs to the rally.

Nuvama Institutional Equities, which has kept the stock in its 'braveheart' list and upgraded the counter, believes that thermal sector capex is making its comeback. According to domestic brokerage, the stock may deliver an upside of 30 per cent from the current levels.

BHEL has a strong order book and a gradual revival of thermal tendering. The order book stands at over Rs 91,000 crore, which is 4 times the revenues for the 2022-23 financial year.

India’s energy security is paramount, followed by green transition’— a resounding theme that echoed in our recent talks with MoP/CEA officials. With only 3-4 per cent buffer capacity in May 2023, from peak demand of 221GW, there is an urgent need to add power capacity, said Nuvama.

Shares of BHEL have gained more than a per cent to Rs 93.45 on Monday, commanding a total market capitalization of Rs 32,300 crore. The scrip had settled at Rs 92.12 on Friday. Shares of BHEL have gained about 110 per cent in the last one year, while the stock has surged about 20 per cent in the year 2022 so far.

Even the Management guidance suggested that demand for coal-based thermal power has picked up due to higher demand for power. BHEL, in consortium with Titagarh Wagon, has won an order of Rs 23,500 crore for 80 Vande Bharat train sets.

"The CEA is mulling 24GW of thermal orders over four–five years, and 8–9GW more in case of a miss in target renewable energy addition of 275GW by FY30," it said. "We are upgrading BHEL to 'buy' on near-term thermal capex revival and limited competition, which implies earnings re-rating potential, We are raising target price to Rs 125 from Rs 85 earlier."

The company board of BHEL has fixed August 11, 2023 (Friday) as the record date for the purpose of determining the eligibility of the members to receive final dividend of Rs. 0.40 per share for the year 2022-23, the company said. BHEL will hold its annual general meeting on August 24, 2023 (Thursday), the company said in a separate exchange filing on Monday.

"Wexpect 6 per cent year-on-year (YoY) improvement in revenues driven by the industrial segment and marginal decline in power segment revenues," said Kotak Institutional Equities in its Q1 estimates for the company.

"We expect EBITDA to remain negative on weak executable backlog and seasonality. We expect employee costs to remain elevated. We also expect other expenses to move up. Previous quarters had the benefit of provision write-back in other expenses," it added.

Antique Stock Broking expects BHEL to report sales at Rs 5,467.5 crore, up 17 per cent YoY with an EBITDA at Rs 547 crore. The company is likely to report profit on an operation basis but may report a net loss during the three months ended June 30, 2023. The brokerage has a buy rating on the stock.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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