Bharat Heavy Electricals Limited (BHEL) reported a quarterly profit of ₹382 crore, its first first-quarter profit in eight years, with revenue rising 40% year-on-year to ₹7,698 crore. Investors are weighing this performance against concerns from some brokerages regarding high valuations and a slowing thermal power order cycle.
Bharat Heavy Electricals Limited (BHEL) shares reached a new 52-week high of ₹446.50 during Friday's trading session. This movement follows the company's latest quarterly results, which showed a profit after tax of ₹382 crore for the first quarter. This result is significant as it marks the first time in eight years that the company has turned a profit during the first quarter of the financial year.
The company’s performance was supported by a 40% year-on-year increase in revenue, which reached ₹7,698 crore. Additionally, the company recorded an EBITDA—a measure of operating profit—of ₹735 crore, compared to a loss of ₹352 crore in the same period last year. BHEL’s order book remains substantial, standing at ₹2,60,255 crore as of the end of June, representing a 27% increase compared to the previous year.
Valuation and Market Perspectives
Despite the positive turnaround, the stock's valuation has become a point of discussion among market analysts. The stock is currently trading at a trailing price-to-earnings (P/E) ratio of 63.87. Brokerage houses have expressed differing views on whether this valuation is justified given the company's future growth prospects.
JPMorgan has maintained an 'Underperform' rating, citing a concern that the peak of the thermal power ordering cycle may have passed. The brokerage highlighted that order inflows declined by 19% year-on-year in FY26 and projected a further 12% drop for FY27. Meanwhile, Macquarie shifted its stance to 'Neutral,' raising its target price to ₹315. While the brokerage acknowledged the company's strong execution, it flagged high receivables and the necessity for consistent profitability as potential risks.
On the other hand, UBS maintains a 'Neutral' view with a target of ₹460, highlighting the company’s strong execution in the power segment and a recent major export order worth ₹2,300 crore for gas turbine generator packages. However, the firm also noted a moderation in profit margins within the industry segment, which fell to 13.6% from 19.3% year-on-year.
JM Financial remains more optimistic with a 'Buy' rating and a target of ₹481. The firm points to a 202 basis point improvement in gross margins as evidence that newer, better-priced contracts are now being executed. The brokerage expects that India’s thermal capacity addition targets will continue to support the company’s business.
Moving forward, investors will be monitoring whether the company can maintain these profitability levels while managing its receivables and navigating the projected industry-wide slowdown in new thermal power orders. The actual pace of order execution and the realization of payments from these large orders will be important factors for the company’s cash flow and margin stability.