'Subpar execution': Multibagger PSU stock BHEL falls 4% from day's high; what analysts say

Shares of Bharat Heavy Electricals Ltd (BHEL) on Thursday fell 4 per cent from its day's high, as analysts believe execution is yet to pick up at the PSU, even as the pace of thermal ordering remains strong. The PSU reported a net loss of Rs 211 crore for the June quarter. Its revenue increased 9.6 per cent YoY to Rs 5,485 crore.

ICICI Securities said BHEL continued to report subdued set of results due to subpar execution. It expects a ramp up in execution from FY26 onwards. For now, the brokearge has a 'Buy' rating on the stock with a target price of Rs 370.

On Thursday, the scrip was trading at Rs 305.70, 4.43 per cent lower than its day's high of Rs 319.90. The multibagger PSU stock is up 195 per cent in the past one year.

Antique Stock Broking expects BHEL's business performance to improve from H2FY25 onwards, as the recently bagged better-margin orders enter execution, leading to material improvement in the company's profitability.

"We believe BHEL will witness a meaningful reversal in its ordering cycle 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 FY24-27. Hence, we maintain a BUY rating on the stock with a target price of Rs 361," said Antique Stock Broking.

Nuvama is positive on BHEL. It noted that the Ebitda level losses continued due to execution of legacy projects while the large inflows seen in FY24 should likely enter execution phase from FY26.

" We retain ‘Buy’ on the back of 35–40GW thermal ordering likely over FY26E–28 of which we assume 25GW orders shall be spread over FY25E–26E (9.6GW in FY24)," it said.

ICICI Securities said BHEL is trying to diversify its order book and has recently, in consortium with Titagarh Wagons, won a Vande Bharat order worth Rs 23,500 crore to supply 80 trainsets and service them for 35 years thereafter.

"We expect more Vande Bharat orders in the next two-three years, where BHEL again stands to benefit from its experience. BHEL has also developed a strong moat in defence orders and is the sole supplier of SRGM naval guns. In FY23, it won an order to supply 20 SRGM guns worth Rs 3,800 crore. It is working on defence indigenisation projects and hopes to participate in air defence guns, tanks and propulsion systems going forward," it noted.

The brokearge said NTPC has guided to award new thermal power plants of up to 26GW by FY26E. As a result, it expects execution to ramp up, gross margins to expand and working capital to improve with the completion of legacy projects.