'Inexpensive, potential to re-rate': Buy BHEL stock, says Antique; here's target price

After the rerating seen in the past one year, Bharat Heavy Electricals Ltd (BHEL) shares look inexpensive, said Antique Stock Broking, as it maintained its 'Buy' call and suggested a target price of RS 300 on the PSU. The brokerage expects BHEL to report an average annual order intake of Rs 70,000 crore during FY24–27E, which would be over 2 times the average Rs 27,400 crore orders booked during FY12–23.

"Despite strong execution, we project the order book to rise to an all-time high of Rs 2.2 lakh crore in FY27. Earnings could grow exponentially over the next three years, given strong operating leverage. We maintain BUY on the stock with a target price of Rs 300, based on a PE of 26 times FY27," Antique Stock Broking said.

BHEL has recently announced winning a large order worth Rs 7,500 crore (excluding taxes) from GSECL to set up 1x800 MW - Unit 7 Ukai thermal power plant. Antique Stock Broking said TPP order finalisation witnessed a sharp uptick in FY25 with Rs 70,000 crore-plus worth of orders getting finalised in favor of BHEL in the power sector.

Additionally, BHEL had already bagged mega orders to set up 1x800 MW Singareni TPS Stage II awarded by SCCL worth Rs 6,700 crore and 2x660 MW Phase II Raghunathpur TPS awarded by DVC worth Rs 6,200 crore in 4QFY25.

"Business outlook looks promising as 4 GW of ordering is expected to materialize & business performance is expected to further improve in FY26 as the recently bagged better-margin orders enter execution. We expect a cumulative order inflow of Rs 3 lakh crore over FY24–27E, which coupled with the accelerated execution of the existing order book of Rs 1.7 lakh crore, should significantly improve BHEL’s operational performance leading to a likely 149 per cent earnings CAGR over FY24–27E," Antique said.

Antique said the stock is inexpensive and has the potential to re-rate going ahead.

The domestic brokerage BHEL has a strong offering for the railway segment and supplies a diverse range of products and propulsion systems for various rolling stock. The Indian Railways plans to invest Rs 9.2 lakh crore over FY26–31E and given BHEL’s strong position in rolling stock and propulsion systems it offers significant growth opportunities to the company. BHEL, in consortium with Titagarh, has already won an 80 trainset order for Vande Bharat to supply propulsion units, execution of which is expected to gain momentum from FY26.

The Indian Railways plans to order 4,500 Vande Bharat trainsets by 2047 thus providing a long term sustainable business potential for BHEL’s product portfolio, Antique Stock Broking noted.

BHEL has capabilities in several areas like guns for naval ships, systems, and power equipment, including steam and gas turbines for ships; armored vehicles; missile systems and systems for aerospace.

"We believe that the defence space will meaningfully add to BHEL’s order book over the next few years," Antique Stock Broking said.