ewsba.se
Bharat Heavy Electricals Ltd’s (BHEL) shares have gained about 8% in the past two trading sessions, and also hit an all-time high of ₹399 apiece on Monday, surpassing the previous all-time high of ₹390 seen on 7 November 2007. Not without reason.
The state-owned equipment manufacturer’s consolidated Ebitda jumped 111% year-on-year to ₹1,753 crore for the March quarter (Q4FY26). Ebitda is earnings before interest, taxes, depreciation, and amortization.
In fact, the stock has risen over 50% over the past month after the government’s policy relaxation on the import of critical items from China, and as its business update showed strong revenue growth.
BHEL has commissioned most of its low-margin legacy projects, where it faced execution issues in FY26, setting the stage for margin improvement. Projects under execution now are of higher value, based on advanced supercritical technology and provide higher fuel efficiency. As per JM Financial Institutional Securities, average realization for BHEL stood at ₹8.3 crore per megawatt (MW) for the project it won in November, against ₹6.4 crore per MW in September 2022.
BHEL’s order inflow from industry or non-thermal segments is robust, increasing by 50% year-on-year in FY26, and contributing over one-fifth of the total inflow of about ₹76,000 crore, which is down from ₹92,000 crore in FY25.
The non-thermal segment comprises transmission, transport, defence, process industry, etc. An agreement with a wing of the Defence Research and Development Organisation, signed last month for the transfer of technology related to naval vessels, would further add to BHEL’s capabilities.
Among the large power sector orders are the equipment supply order for eight units of 800 MW awarded by Adani Power for its Assam and Rajasthan project, and three units of 800 MW awarded by NTPC for its Telangana project.
“We reckon the permission to import from China, change in product mix in non-thermal orders (high-voltage direct current, naval guns, nuclear), indigenisation of supercritical and operational leverage would propel margins to mid-teens over next two–three years,” said JM Financial, projecting BHEL’s Ebitda margin to reach 11.2% by FY28.
This is far higher than FY26 and FY25 margins of 6.9% and 4.4%, respectively. The central government relaxed its guidelines in March, allowing BHEL to import 21 critical items from China for five years. These items are currently being imported from Western countries, which adds to the cost and time of execution.
Profitability in Q4FY26 was aided by strong execution, leading to better operating leverage and an improvement in gross margin. Revenue grew 37% year-on-year to ₹12,310 crore. FY26 revenue grew 19% to ₹33,782 crore while Ebitda grew 89%.
BHEL’s order backlog now stands at ₹2.4 trillion, equal to seven times FY26 revenue, providing strong revenue visibility. With continued investment in thermal power capacity addition to meet growing demand, analysts expect strong inflows for BHEL. Also, about 50 GW of old thermal units, operating on high-cost and high-emissions sub-critical technology, would be more than 40 years old by 2032, as per ICICI Securities.
These would need to be replaced, further adding to the order pipeline. ICICI Securities expects BHEL’s order inflows to be more than ₹70,000 crore in FY27.
BHEL’s shares trade at about 43 times its estimated FY27 earnings per share, as per Bloomberg consensus. All eyes will now be on the pace of execution and margin accretion over the next few quarters.
Ashish Agrawal has been associated with Mint for the last two years and writes for the ‘Mark to Market’ column. He has done his master’s in business administration from IIM Calcutta, specialising in finance and operations. His previous experience includes stints with The Economic Times and JSW Steel, among others. He has over 15 years of experience in stock market research, analysis and writing, and has covered sectors such as metals and mining, oil and gas, power (including renewables), capital goods (including electronics).<br><br>Ashish is passionate about infrastructure sectors, which, he believes, are the strands that lift the entire economy. He was invited for a visit to France, by the Government of France, in recognition of his coverage of issues related to nuclear power. Besides, Ashish has considerable understanding of the Indian and global economy and is the author of a book, “Indian Economy & Business: Overview of Recent Trends & Events”. As a part of the enterprise risk management team at JSW Steel, he had conceptualised, proposed and developed a Risk Index for the enterprise to quantify and monitor all the risk factors, and take mitigating action as needed.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.