BHEL shares: Kotak says 'Sell', sees 55% downside; other stock brokers see up to 44% rally

BHEL shares target price: Brokerage firms are largely positive on shares of Bharat Heavy Electrical Ltd (BHEL), but Kotak Institutional Equities has a contrarian view on the PSU multibagger counter as it missed the estimates. When other analysts see up to 44 per cent upside in the stock, Kotak is forecasting a 55 per cent correction in the stock.

BHEL reported a 4 per cent year-on-year (YoY) jump in the net profit at Rs 504 crore for the quarter ended on March 31, 2025, while its revenue rose 9 per cent YoY to Rs 8,993 crore. The company also declared a dividend of Rs 0.50 per share for FY25. Ebitda was up 14.2 per cent YoY to Rs 831 crore, while margins for the quarter improved 40 basis points to 9.55 per cent.

BHEL’s EBITDA was an 8% miss, adjusted for prior provisions reversed and supported by very strong industrial print that may not sustain. The key disappointment was the weak execution in the key power segment, at odds with the strong order backlog, said Kotak Institutional Equities.

"The working capital situation was ameliorated by strong customer advances and otherwise remains weak. We believe that DCF is a better way of valuing BHEL for the business having negligible FCF generation over the growth phase of revenues FY 2025-30 and a stable FCF phase," it said, cutting  FY2026/27 estimates by 19 per cent/3 per cent with a 'sell' tag and a target price of Rs 115.

Before falling into red, shares of BHEL added more than a per cent to Rs 253.55 with a total market capitalization close to Rs 90,000 crore. The stock dropped over 2.35 per cent from day's high to Rs 247.50 during the session. The stock has gained nearly 45 per cent from its 52-week low at Rs 176, hit about 10 week ago.

BHEL posted the highest yearly OI, providing strong visibility. Cash surged 24 per cent YoY to Rs 7,600 crore led by better profitability and favourable, said Nuvama Institutional Equities.

"We retain ‘buy’ given BHEL’s dominant play in India’s thermal capex revival with another 40–50GW ordering likely over FY26–28E, implying it may win another 7–8GW yearly over next 2–3 years even at 60–70% market share. We are factoring in execution spilling over to FY27E and hence slashing FY26E EPS by 43 per cent assigning 25 times," it added with a target price of Rs 360.

BHEL is the poster child of the Indian thermal power industry. India has recognised the need for building new base load plants despite energy transition. The industry has seen a flurry of new coal orders in FY24 and FY25. Therefore, it saw order inflow (OI) of Rs 78,000 crore/Rs 92,500 crore in FY24/FY25. As a result, BHEL’s order book stands at Rs 2 lakh crore, said ICICI Securities.

"Besides, it is L1 orders for 6GW of coal-based power plants; we estimate the total order size from these projects at over Rs 50,000 crore. We estimate an OI of Rs 80,000 crore in FY26E. We expect a sharp ramp-up in revenues to follow from FY25–27E., We reiterate 'buy' with a revised TP of Rs 324," it added.

While Kotak's target price of Rs 115 suggest a 55 per cent correction in BHEL's stock price, while the target price from Nuvama suggest a 44 per cent upside in the stock. ICICI Securities, however, has increased its target by 25 per cent.

The current thermal power capex cycle began in September 2023, when India recorded its then highest peak demand of 243 GW, leading to a sharp and unexpected surge in ordering momentum across utilities, said JM Financial. "We expect pick up in execution from FY26 supported by a growing and now executable order book," it said.

As execution of legacy projects are nearing completion (NTPC Patratu/ Talcher 80 per cent/30 per cent completed) and industry orders-mix improves, Ebitda margin is likely to improve gradually from 4.4 per cent in FY25 to at least 11 per cent in FY28," added JM. "We continue to maintain a 'buy' on the stock with a target price of Rs 281."

Business outlook looks promising as 10 GW of ordering is expected to materialize in FY26 as well. We expect business performance to further improve in FY26 as the recently bagged better-margin orders enter execution leading to material improvement in the company’s profitability, said Antique Stock Broking.

"We believe BHEL will continue to witness elevated ordering of Rs 80,000 crore over the next 3–4 years, led by both industry (non-power) and power segments. Supported by strong ordering, improving execution, and benefits of operating leverage, BHEL’s earnings are anticipated to climb up multi-fold over FY 25-27," it said with a 'buy' with an unchanged target price of Rs 300.