Shares of Bharat Heavy Electricals Ltd (BHEL) tumbled more than 6% on Thursday, reaching Rs 434.70 and reducing its market capitalization to Rs 1.5 lakh crore. This dip occurred despite the company reporting strong second-quarter financial results for fiscal year 2027, which showed significant profit and revenue growth. The market reaction highlights the divided opinions among brokerage firms regarding BHEL's future prospects.
BHEL's Robust Q2FY27 Performance
For the September 2026 quarter, BHEL delivered impressive financial figures:
- Net Profit: Soared 120% year-on-year (YoY) to Rs 810 crore.
- Revenue: Increased 23.8% YoY to Rs 9,300 crore.
- EBITDA: Jumped 76.6% YoY to Rs 1,026 crore, with margins expanding to 11%.
- Order Book: Stood at a robust Rs 2.57 lakh crore as of September 30, 2026, marking a 17.27% YoY increase.
Furthermore, BHEL announced a Rs 500 crore capital investment proposal for new thermal and nuclear manufacturing facilities at its HEEP-Haridwar unit and has begun hiring again after 15 years, signaling expansion plans.
Brokerages Offer Mixed Ratings and Target Prices
Despite the strong operational performance, analysts are split on BHEL's stock outlook, citing concerns over competition and valuation:
- CLSA reiterated an 'underperform' rating, raising its target price to Rs 351 from Rs 306. The firm cited the entry of new competitors into BHEL's core thermal equipment segment and believes the stock's valuation (39 times FY28CL PE) already prices in much of the recovery.
- Jefferies also maintained an 'underperform' rating with a target price of Rs 442, adjusting estimates to reflect improved gross margins.
- Axis Capital issued a 'sell' rating, setting a September 2027 target price of Rs 305. The firm revised its FY28/29E EPS upwards but lowered working capital intensity.
- PL Capital held a 'reduce' rating, revising its target price to Rs 426, acknowledging stronger execution but highlighting ongoing monitorables like order conversion.
- In contrast, Macquarie upgraded BHEL to 'neutral' with a target price of Rs 420, citing continued execution traction and margin expansion, alongside a strong order backlog.
- ICICI Securities maintained a 'buy' rating, increasing its target price to Rs 550 from Rs 520. They revised FY27E/FY28E EPS upwards, factoring in improved execution and anticipating significant order intake in the coming years.
- JM Financial also maintained a 'buy' rating, raising its target to Rs 535. The firm increased its EBITDA margin estimates for FY28/FY29, driven by a promising thermal pipeline and a strong net cash position.
While BHEL's operational improvements, margin recovery, and diversification efforts beyond thermal power support a positive medium-term growth outlook, the intensifying competition and the stock's current valuation remain key points of contention for investors.