Bharat Heavy Electricals (BHEL) has commenced the supply of underslung traction transformers for the Vande Bharat Sleeper Train project being executed by a BHEL-led consortium along with TRSL. The company announced this development in a regulatory filing, marking a significant milestone in India's rail transportation sector.

Flag-off Ceremony and Project Specifications

A flag-off ceremony to mark the dispatch of the first set of semi-high-speed underslung traction transformers was held at BHEL's Jhansi plant and conducted virtually. The development strengthens the company's strategic entry into the semi-high-speed propulsion segment.

Multi-Plant Manufacturing Integration

The Vande Bharat Sleeper Train project showcases BHEL's integrated manufacturing capabilities across multiple facilities. Earlier, traction converters for the same project were flagged off from BHEL's Bengaluru plant. Another key propulsion system equipment, the traction motor, has been developed and manufactured at BHEL's Bhopal unit. The traction transformers are being dispatched to Kolkata for final assembly of the Vande Bharat Sleeper Trains.

Rail Borne Maintenance Vehicles Contract

Separately, BHEL-Jhansi has received an order for Rail Borne Maintenance Vehicles (RBMVs). The project falls under the specialised rolling stock segment of the railway infrastructure domain and reflects the Jhansi plant's expanding role beyond conventional rolling stock applications.

Technology and Strategic Impact

Rail Borne Maintenance Vehicles are specialised railway vehicles used for construction, inspection, repair and upkeep of railway tracks, helping improve safety, ride comfort and asset life by reducing manual labour and increasing precision. The vehicles will be designed and manufactured at BHEL's Jhansi plant, contributing to indigenisation and self-reliance in railway track maintenance technologies.

The order aligns with government initiatives such as Make in India and Aatmanirbhar Bharat, as the RBMVs will be manufactured domestically. As India's leading manufacturing enterprise in the energy and infrastructure sectors, BHEL continues to deliver indigenous solutions across power, transmission, transportation, defence and industry segments.

Stock Performance

Shares of Bharat Heavy Electricals closed 0.64% higher at ₹267.25, reflecting positive market sentiment towards the company's expanding role in India's railway infrastructure development.

Bharat Heavy Electricals witnessed significant selling pressure beginning January 8, when shares tumbled 14% intraday following media reports suggesting a government committee had recommended allowing Chinese power equipment manufacturers to participate in government contract bidding. The market's primary concern revolves around potential renewed competition that could impact BHEL's dominant position in the boiler-turbine-generator segment.

Market Reaction Analysis

Several analysts believe the sharp market reaction may be overdone, considering multiple factors that could limit the actual impact of such policy changes. Brokerages suggest the recommendation faces low probability of implementation given the current volatile geopolitical environment between India and China.

Even if restrictions were lifted, industry experts indicate that demand for Chinese equipment has declined due to persistent quality issues, high downtime, and elevated maintenance costs. Systematix Shares and Stocks noted in their January 12 report that any potential relaxation would likely aim at easing supply-chain constraints and improving project execution rather than increasing original equipment manufacturer competition.

Strong Order Book Foundation

Despite market concerns, BHEL's fundamentals remain robust with significant contract wins and a substantial order pipeline. The company's recent achievements include:

The order inflow trajectory demonstrates remarkable improvement, with FY25 witnessing ₹92,000 crore compared to ₹78,000 crore in FY24. This represents a substantial increase from the ₹20,000 crore annual average during FY21-23. ICICI Securities projects FY26 order inflows to maintain levels close to FY25 performance.

Financial Performance Recovery

The company has emerged as a key beneficiary of the government's renewed focus on thermal power capacity addition, following power shortages attributed to excessive reliance on solar energy. This policy shift has directly contributed to BHEL's swelling order book and improved financial outlook.

Execution and Margin Outlook

BHEL's historical financial performance faced challenges due to high operational costs, resulting in an average EBITDA margin of merely 3.40% during FY23-25. However, the September quarter (Q2FY26) showed significant improvement with margins reaching 7.70%.

ICICI Securities expects execution ramp-up acceleration in FY27, noting that previous delays stemmed from teething issues in new build-ups, which are now being resolved. The brokerage anticipates sharp execution improvement as these operational challenges are addressed.

Valuation and Market Expectations

Bloomberg consensus estimates project BHEL's earnings per share to surge to ₹9.30 in FY27, representing a six-fold increase from ₹1.50 in FY25. The stock currently trades at approximately 28x FY27 price-to-earnings ratio based on Bloomberg data.

Analysts emphasize that such elevated valuation multiples and earnings expectations will require consistent execution and margin delivery to justify investor confidence. The company's ability to capitalize on its substantial order book while maintaining operational efficiency will be crucial for sustaining market performance going forward.