Hold BHEL; target of Rs 215: Prabhudas Lilladher

Prabhudas Lilladher's research report on BHEL

We revise our FY26/27E EPS estimate by -30.8%/-9.5% factoring in weaker pace of execution and higher other expenses. BHEL reported a dismal quarter with a flattish revenue of Rs54.9bn and an EBITDA level loss of Rs5.4bn due to sharp increase in other expenses. Continued execution challenges in the Power segment led to 5.6% YoY decline in revenue despite a strong power order book of ~Rs1.6trn. Macro tailwinds—public/private capex and policy support— continue to drive robust order inflows, including ~14.6 GW of thermal orders won in FY25 and a Rs65bn equipment order won from Adani Power during the quarter. BHEL’s active diversification into transmission, transportation, defense, and Oil & Gas is yielding results with award of the prestigious 6 GW Bhadla-Fatehpur HVDC order to the consortium of the company during Q1, further bolstering its presence in the industrial segment. While near-term challenges persist in execution and profitability, the strong order pipeline and strategic shift toward non-power segments position BHEL for long-term back ended growth.

Outlook

The stock is currently trading at a P/E of 58.9x/23.4x on FY26/27E earnings. We maintain our rating to ‘Hold’ and value a stock at a PE of 22x Mar’27E (same as earlier) with a revised TP of Rs215 (Rs237 earlier).

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