Bharat Heavy Electricals shares staged a strong recovery in early Friday trading, rising over 3% as investors returned to the stock following Thursday's sharp selloff. The rebound comes after policy-related concerns had triggered a broad correction across capital goods stocks.

Stock Performance and Recovery

The following table shows BHEL's recent trading performance:

The stock's recovery follows Thursday's nearly 9% decline when BHEL hit the lower circuit intraday. The selloff was triggered by reports suggesting India may ease restrictions on Chinese firms bidding for government contracts, which sparked concerns across capital goods companies including Siemens, ABB India, and L&T.

UBS Initiates Buy Rating

Buying interest returned after UBS initiated a 'Buy' rating on BHEL with a target price of ₹375 per share, implying over 35% upside from Thursday's closing levels. The brokerage cited strong order momentum and improving execution visibility as key drivers for its positive stance.

Major Order Win Details

UBS highlighted BHEL's significant contract win, with key project parameters outlined below:

This project marks the first commercial deployment of BHEL's proprietary Pressurised Fluidised Bed Gasification (PFBG) technology, representing a significant milestone for the company's technological capabilities.

Market Context and Outlook

Friday's rebound reflects selective buying in beaten-down capital goods stocks after Thursday's sharp correction across the sector. Despite recent volatility, BHEL's annual performance remains strong, with shares up approximately 28% over the past year, significantly outperforming the Nifty 50's roughly 10% gain during the same period.

The company's market capitalisation stood at approximately ₹94,700 crore at the previous close, reflecting its substantial presence in India's capital goods sector.

Bharat Heavy Electricals shares gained momentum on Friday, January 9, after the company announced securing a substantial order worth ₹5,400.00 crores from its joint venture with Coal India Ltd. in Odisha. The order represents a significant milestone as it marks the first commercial deployment of BHEL's proprietary technology.

Major Contract Details

The comprehensive order encompasses the coal gasification and raw syngas cleaning plant (LSTK 1 Package) for Bharat Coal Gasification and Chemicals Ltd.'s (BCGCL) coal to 2,000 TPD ammonium nitrate project in Odisha. The contract scope includes multiple components:

The contract covers design, engineering, supply of equipment, civil works, setting up, commissioning and operations and maintenance (O&M) services for the LSTK 1 Package. The preliminary acceptance, commissioning and performance guarantee test is scheduled for completion within 42 months, while O&M services will extend for 60 months from the preliminary acceptance.

Technology Milestone and Market Impact

This order represents a crucial transition for BHEL as it marks the first commercial use of the company's proprietary PFBG technology, moving from the research and development stage to the execution phase. The development comes as a positive catalyst following recent market volatility.

BHEL shares had declined over 10% on Thursday after a Reuters report indicated that the Indian government is considering lifting restrictions on Chinese companies in bidding for government contracts. This news also impacted other capital goods companies, with ABB India, Siemens India, and L&T falling between 4% to 6%.

Analyst Outlook and Stock Performance

Despite recent market concerns, brokerage firm UBS maintained its buy rating on BHEL with a price target of ₹375.00, implying a potential upside of 36% from current levels. UBS noted that this transaction provides a positive read-through for the stock after the recent correction.

BHEL shares were trading 1.5% higher at ₹275.95 apiece just after market open on Friday. The stock has demonstrated strong performance over the past year, gaining 27.5% during this period, reflecting investor confidence in the company's execution capabilities and order book strength.