BHEL Receives Hold Rating with Revised Target Price of ₹245 from Prabhudas Lilladher
Prabhudas Lilladher maintains Hold rating on BHEL with revised target price of ₹245, down from ₹250. The brokerage cut FY26E/FY27E EPS estimates by 18.9%/4.3% citing slower execution pace. BHEL posted 16.4% YoY revenue growth with 225bps EBITDA margin expansion. Power segment grew 13% YoY despite ₹1.7trn backlog, while Industry segment surged 27.4% YoY driven by transmission, transportation, oil & gas and defense verticals.
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Bharat Heavy Electricals has received a Hold rating from Prabhudas Lilladher with a revised target price of ₹245, down from the earlier target of ₹250. The brokerage has adjusted its earnings estimates while acknowledging the company's mixed performance across different business segments.
Revised Earnings Estimates
Prabhudas Lilladher has revised its earnings projections for BHEL, citing several operational factors:
| Parameter | Revision |
|---|---|
| FY26E EPS Estimate | -18.90% |
| FY27E EPS Estimate | -4.30% |
The downward revisions factor in slower execution pace amid strong order backlog, normalized provision, and moderate order inflow momentum.
Financial Performance Highlights
BHEL demonstrated strong financial metrics in its recent performance:
| Metric | Performance |
|---|---|
| Revenue Growth | 16.40% YoY |
| EBITDA Margin Expansion | 225 basis points YoY |
The EBITDA margin expansion was aided by lower other expenses compared to a higher base in Q3FY25, though this was partially offset by a decrease in gross margin.
Segment-wise Performance Analysis
Power Segment
The Power segment showed slower execution momentum despite maintaining a substantial order pipeline:
| Parameter | Details |
|---|---|
| Revenue Growth | ~13.00% YoY |
| Order Backlog | ₹1.70 trillion |
| Recent Contract Win | ₹66.50 billion EPC package from NTPC |
| Project Specification | 1×800MW thermal power project |
The recent NTPC contract win reinforces BHEL's strong positioning in the thermal power space.
Industry Segment
The Industry segment continued to deliver robust performance across multiple verticals:
| Metric | Performance |
|---|---|
| Revenue Growth | 27.40% YoY |
| Q3FY25 Order Inflows | ₹16.30 billion |
| Previous Quarter Comparison | ~₹57.00 billion (high base) |
The strong revenue growth was driven by accelerating traction across:
- Transmission verticals
- Transportation sector
- Oil & gas industry
- Defense applications
However, order inflows in the Industry segment moderated sharply compared to the previous quarter's high base.
Valuation and Investment Outlook
The stock's current valuation metrics reflect mixed market sentiment:
| Valuation Parameter | Multiple |
|---|---|
| Current P/E (FY27E) | 28.20x |
| Current P/E (FY28E) | 20.30x |
| Target P/E Multiple | 22x Sep'27E |
| Revised Target Price | ₹245.00 |
Despite near-term challenges around execution intensity, Prabhudas Lilladher notes that BHEL remains well-positioned for sustained growth. The company benefits from a robust pipeline and a gradual shift towards non-Power opportunities, supported by rising public and private capital expenditure.
Key Investment Considerations
The Hold rating reflects a balanced view of BHEL's prospects, considering both challenges and opportunities. While the Power segment faces execution headwinds, the diversified Industry segment continues to show strong momentum across multiple end-user industries. The company's substantial order backlog provides revenue visibility, though the pace of execution remains a key monitoring factor for investors.
Historical Stock Returns for Bharat Heavy Electricals
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| -4.92% | -6.63% | -9.28% | -0.14% | +15.32% | +529.31% |
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