Geojit Investment Services has upgraded Bharat Heavy Electricals Limited (BHEL) to a BUY recommendation, setting a revised target price of Rs 329 as the conglomerate demonstrates robust operational execution, rising profitability, and sustained order inflows. With strong performance across thermal, hydro, and industrial segments, BHEL’s diversification into renewables, defence, and rail technologies further underpins the positive outlook. Management’s focus on efficiency, digital transformation, and execution discipline signals greater value creation for investors, notwithstanding temporary volatility in order books.

1. Revenue Momentum Strengthens Across Power and Industry

BHEL ended Q2FY26 with revenues of Rs. 7,512 crore, marking a 14.1% year-on-year increase.
The power segment, the company’s flagship vertical, expanded 12.9% YoY to Rs. 5,676 crore, backed by steady progress in thermal and hydro power projects. The industry division grew 18% YoY to Rs. 1,836 crore, supported by traction in rail transport equipment, defence systems, and process industry solutions.

The company’s broad engineering portfolio continues to reduce reliance on conventional power cycles and enhances earnings stability.

Digital execution platforms, tighter workflow management, and improved logistics coordination contributed to the quarter’s consistent operational delivery.

2. Order Inflow Moderates, but Mix Improves Substantially

Order inflows for Q2FY26 stood at Rs. 35,000 crore, a 14.8% decline YoY.
However, the internal mix improved meaningfully:

Industry orders increased 239% YoY to Rs. 9,383 crore.

Power orders declined 32% YoY to Rs. 25,992 crore, partly due to timing differences in large-scale thermal tenders.

The surge in industrial orders demonstrates BHEL’s accelerating pivot toward non-power segments—an essential ingredient for long-term valuation expansion.

New project wins in rail signalling, renewable systems, and engineering procurement contracts reflect a structurally expanding opportunity pipeline.

3. Strategic Wins Reinforce Technological Leadership

During the quarter, BHEL secured multiple large-scale contracts, including:

EPC contracts for 660 MW Amarkantak Unit 6 and 660 MW Satpura Unit 12

A major 800 MW thermal BTG supply contract for the Anuppur project

The balance-of-system package for a 300 MW solar-PV installation in Khavda

The company’s first order for the KAVACH train-protection system, covering a 36-km rail section

In addition, BHEL supplied space-grade solar panels and lithium-ion batteries for the NISAR Earth-observation mission, demonstrating the firm’s advanced precision-engineering capabilities.

These wins highlight BHEL’s increased relevance in high-technology, renewable, and transportation-focused infrastructure projects.

4. Margin Expansion Driven by Costs and Efficiency Gains

BHEL delivered a sharp improvement in profitability:

EBITDA rose 111.2% YoY to Rs. 581 crore

EBITDA margin expanded by 350 bps to 7.7%

PAT more than tripled to Rs. 375 crore

Other income increased nearly 57% YoY, aiding bottom-line strength

The major driver was a 42% decline in other expenses, highlighting effective operating discipline and better contract management.

The margin recovery is one of the healthiest the company has recorded in recent years, indicating sustainable operating leverage.

5. Updated Forecasts and Valuation—BUY with Rs. 329 Target

Revenue and profitability expectations for FY26–FY27 have been revised upward across key metrics.

Revised Estimates (Rs. crore)

A valuation multiple of 2.4x FY27E Price-to-Sales leads to a fair value of Rs. 329 per share, implying approximately 15% upside from the current levels.

6. What’s Powering the Long-Term Growth Story

Clean Energy Expansion: Broader participation in solar, hydro, and nuclear ecosystems strengthens BHEL’s future project pipeline.

Transportation & Rail Safety: The KAVACH order marks the start of deeper engagement in railway modernisation.

Defence & Aerospace: Space-grade component expertise adds a new dimension to the company’s engineering portfolio.

Digital Management Tools: Automated project-tracking systems and data-driven oversight enhance execution accuracy.

New Capacity Additions: Commissioning progress at Yadadri, Khurja, and Punatsangchhu contributes to a multi-year generation boost.

7. Key Financial Snapshot

Quarterly Performance (Consolidated)

8. Investment View—Why BHEL Deserves Attention

BHEL appears to be moving past a multi-year inflection point. With strengthened execution capabilities, diversified order additions, and rising demand across multiple infrastructure verticals, the company’s earnings trajectory is positioned for structural improvement.

Key Drivers Supporting Upside:

Sustainable margin recovery

Stronger working-capital management

Growing presence in renewables and nuclear technologies

Expanding footprint in rail safety and transportation systems

Healthy balance sheet with moderate leverage