BHEL share price may see over 30% upside; Nuvama raises target price
- Bharat Heavy Electricals Ltd (BHEL) has secured 3GW of thermal orders in H1FY24, with an additional 7.4GW of orders being tendered for. The brokerage projects that BHEL will have 6-7GW of thermal OI and a 50% market share by the end of FY24.
Bharat Heavy Electricals Ltd (BHEL) has already secured 3GW of thermal orders in H1FY24, according to a recent report from domestic brokerage Nuvama Institutional Equities. An additional 7.4GW of thermal orders are presently being tendered for (awards by Q4FY24/Q1FY25). So, the brokerage projects that BHEL will have 6-7GW of thermal OI and a 50% market share by the end of FY24.
The power ministry of India raised its thermal capital expenditure target to 50–55 GW (from 30 GW), according to the brokerage, due to increased power demand and the inadequacy of renewable energy sources to meet the country's continuous supply needs.
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The brokerage increased the target price by 50%, from ₹150 to ₹225. The stock might witness an upside by more than 30% from its current levels, according to brokerage.
“Given macro tailwinds, we factor in BHEL’s OI at about 4.5GW/year (~3GW earlier), leading to higher revenues and operating leverage-led EBITDA margin expansion to 6.5%/10% in FY25/26E (from 4.8%/8.4%). We are lifting FY25/26E EPS by 56%/32%,” the brokerage said.
With the power balance having already moved towards a deficit scenario from May 23 to September 23, when the stock price was ₹94, the brokerage upgraded BHEL to Braveheart 'BUY' in July 2023.
As a result of the Ministry of Power's (MoP) two increases in thermal capital expenditure targets in the last three months, the brokerage projects 8–12 GW of annual thermal ordering over FY24–30E. For BHEL, it accounts for a 50% market share and approximately 4.5 GW of annual thermal output in a duopolistic market (where L&T's sole rival is). This goes above and beyond its usual OI of ₹140–180 billion, which was oBSErved even during the previous four–five years' downturn.
"We value BHEL at 22x Mar-26E EPS, implying upside potential of 30%-plus at a revised target price of ₹225 (earlier ₹150). Our bull case with a 70% market share and 12% margins implies a bull case target price of ₹272," the brokerage said.
On Monday's overall positive market, BHEL share price touched 52-week high and rose 3.6%. BHEL share price opened at ₹175, and touched intraday high of ₹176.50, and low of ₹170.85 on BSE.
The Nifty 50 hit a new record high of 20,602.50 and the Sensex hit a record high of 68587.82 on Monday. Similarly, the BSE Midcap and Smallcap indices reached record highs at 35,124.23 and 41,221.91, respectively.
Following the state election results, there were significant gains in the domestic market, which boosted trust in the political stability of the country.
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