Brokerage firm Prabhudas Lilladher has maintained a 'Reduce' rating on BHEL despite raising its price target to ₹426. While the company has a strong order book of ₹2.1 trillion and is growing, analysts feel the current share price is already expensive.
Brokerage firm Prabhudas Lilladher has issued a cautious outlook on Bharat Heavy Electricals Limited (BHEL), maintaining a 'Reduce' rating on the stock. This decision comes even as the firm raised its price target to ₹426, reflecting the company’s recent operational progress.
The brokerage view suggests that while BHEL is showing strong business growth, the recent rise in share price means much of this good news is already accounted for by the market. Analysts noted that the stock is currently trading at high valuations—specifically 31.6 times its estimated earnings for fiscal year 2028 and 24.0 times for fiscal year 2029. This valuation makes the stock expensive for new investors, according to the report.
From an operational standpoint, BHEL has seen a 23.8% increase in revenue year-on-year for the second quarter of fiscal year 2027. The company's profit margin stood at 11%, driven by a focus on the power segment and better gross margins. The order book is substantial, currently valued at approximately ₹2.1 trillion. This includes major wins in hydroelectric projects, such as the Heo and Tato-I developments, as well as new gas turbine contracts.
Beyond its traditional power business, BHEL is working to diversify into newer areas like green hydrogen electrolysers, defense, and rail mobility. The company's industrial segment has grown 45% compared to the previous year, showing its effort to reduce reliance on conventional energy markets. In the first half of the current fiscal year, BHEL added 2,260 MW of capacity, putting it on track to meet its annual target of 4,790 MW.
For investors, the primary monitorable remains the consistent execution of these projects. While the company has a massive order backlog, the final financial impact will depend on its ability to complete these orders on time and maintain healthy profit margins. Investors may watch for the company's progress on non-thermal projects, which are intended to provide more sustainable growth in the long run. The core concern for the market currently is whether the company's future earnings can justify the premium valuation the stock is trading at today.