Over the last few months we have seen heavy electrical stocks rise exponentially. Heavy electrical industries have always been the backbone of modern industrial infrastructure. This industry produces critical components for power generation, transmission, and distribution systems. Their products are essential for sectors such as energy, manufacturing, and transportation.
Key players in this field provide solutions that power cities, drive industrial processes, and enable technological advancements. One company which has outperformed the market in the last few months is Bharat Heavy Electricals Limited.
Industry Overview Of BHEL
The advancement of infrastructure, the shift to renewable power sources, and the need for energy on a worldwide scale present a bright future for the heavy electrical sector. Its possibilities are further enhanced by the need for grid upgrade and the growing electrification trends. Digitalization and emerging markets present fresh chances for expansion and creativity.
Nonetheless, the industry faces difficulties like volatile raw material prices, fierce rivalry, and strict environmental laws. In this rapidly changing setting, flexibility, adoption of sustainable energy technology, and increased operational efficiency will be critical to success. Despite these obstacles, the industry’s vital position in driving contemporary economies guarantees its future relevance, and there is still plenty of space for growth and technical improvement in the years to come.
Note: If you want to learn Candlesticks and Chart Trading from Scratch, here’s the best book available on Amazon! Get the book now!
Company Overview Of BHEL
Bharat Heavy Electricals Limited (BHEL) is an Indian state-owned engineering and manufacturing firm. With its headquarters located in New Delhi, it was founded in 1964. The biggest producer of power generation equipment in India, BHEL is well-known across a number of industries, including defense, power, transmission, and transportation.
The corporation employs over 30,000 people and runs multiple production facilities throughout India. With over 53% of India’s installed power generation capacity, BHEL is a major contributor to the country’s industrial development. It is renowned for its efforts in research and development, with a particular emphasis on environmentally friendly solutions.
Critical Projects
In 2023, Bharat Heavy Electricals Limited (BHEL) made significant strides in two key sectors. Firstly, BHEL signed an MoU with Nuclear Power Corporation of India Limited (NPCIL) to jointly pursue opportunities in nuclear power plants using Pressurized Heavy Water Reactor technology. This collaboration reinforces BHEL’s involvement in all three stages of India’s Nuclear Programme.
Secondly, BHEL announced its commitment to support Indian Railways’ ambitious modernization goals, particularly in overhauling signaling systems. As the railway sector undergoes technological upgrades, BHEL plans to adapt and participate in this modernization process. These developments underscore BHEL’s crucial role in India’s infrastructure development, spanning both energy and transportation sectors.
Financial Highlights Of BHEL
BHEL’s financials show a recovery trend. Revenue grew moderately from 21,463 Cr. to 23,893 Cr. over five years. The company turned around from losses in 2020-21 to profits, though declining, from 2022-24. Operating profit margin stabilized at 3% after negative years. Return on Equity improved but remains low at 2.97%. Earnings per share recovered from losses to 0.81 in 2024, down from 1.37 in 2023. Overall, BHEL has regained stability but faces challenges in sustaining profit growth and improving margins.
Recent Orders
BHEL secured a ₹13,300 crore contract for a 1600 MW thermal power plant in Koderma, Jharkhand on June 26, 2024. This project will increase DVC’s thermal capacity to 8140 MW by 2030. In FY24, BHEL won orders for 80 Vande Bharat trains and 20 super fast gun mounts, with deliveries starting June 2025. The government plans to install 80 GW of thermal capacity by 2032, with 30 GW under construction and 44-45 GW to be awarded by FY27. This translates to over 10 GW of annual tenders in the next three years.
Competitors
BHEL operates in a competitive heavy engineering sector, particularly in power generation equipment. The company faces stiff competition from both domestic and international players. Major competitors include Larsen & Toubro (L&T), Siemens, and CG Power & Industrial Solutions ltd. in the domestic market.
Internationally, BHEL competes with giants like General Electric, Siemens, and Mitsubishi Heavy Industries. This crowded market has put pressure on BHEL’s market share and margins. The company is striving to diversify into renewable energy and transportation sectors to maintain its competitive edge.
Key Me trics Of BHEL
SWOT Analysis
Drivers: BHEL’s growth is driven by India’s increasing power demand and government initiatives to expand thermal capacity. The company’s diverse portfolio, including orders for Vande Bharat trains and defense equipment, provides multiple revenue streams. BHEL’s focus on the defense sector and collaborations with international firms for new technologies position it well for future growth.
The planned 80 GW thermal capacity addition by 2032 and expected 10 GW annual tenders for the next three years offer significant opportunities for BHEL to secure more projects.
Restraints: BHEL faces challenges from the global shift towards renewable energy, which could impact long-term demand for thermal power equipment. Intense competition from both domestic and international players in the power sector may pressure profit margins. The company’s execution delays in past projects and working capital issues have affected its financial performance.
Additionally, BHEL’s heavy reliance on government orders makes it vulnerable to policy changes and budget allocations. The need for continuous technological upgrades to stay competitive in a rapidly evolving industry also poses a financial challenge.
Also read..
Future Outlook Of BHEL
BHEL’s future outlook appears cautiously optimistic, driven by several key factors:
- Thermal Power Expansion: The government’s plan to add 80 GW of thermal capacity by 2032 presents significant opportunities. With 10 GW of annual tenders expected over the next three years, BHEL is well-positioned to secure new projects.
- Diversification: BHEL’s expansion into defense and railway sectors (e.g., Vande Bharat trains) helps reduce dependence on the power sector and provides new growth avenues.
- Government Support: As a public sector undertaking, BHEL is likely to benefit from government initiatives aimed at boosting domestic manufacturing and energy security.
- Technology Collaborations: Partnerships with international firms for new technologies, such as maritime gas turbines, could enhance BHEL’s competitiveness.
- Order Book Growth: Recent large contracts, like the ₹13,300 crore Koderma project, strengthen BHEL’s order book and revenue visibility.
Price Target
ICICI Securities: has given a “BUY” rating on the stock with a price target of Rs.370. As the brokerage believes the order book of the company is looking strong for the next 3 years.
Nuvama: has given a “BUY” rating. They have also raised the price target on BHEL significantly from Rs. 265 to Rs. 400, as the brokerage is banking on the strong order pipeline that the company has currently.
Conclusion
In conclusion, BHEL’s performance in the coming months will be closely watched by investors and industry analysts alike. After facing challenges in recent years, including project delays and increased competition, it remains to be seen whether the company can successfully navigate the evolving energy landscape.
Will BHEL be able to capitalize on the growing demand for renewable energy solutions and diversify its portfolio beyond traditional power equipment? Can it improve its order book and project execution to regain its former market dominance? The company’s ability to adapt to changing market dynamics and government policies will likely determine its future trajectory. Share your perspectives on BHEL’s outlook below.
Written By Dipangshu Kundu
By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.
Start Your Stock Market Journey Today!
Want to learn Stock Market trading and Investing? Make sure to check out exclusive Stock Market courses by FinGrad, the learning initiative by Trade Brains. You can enroll in FREE courses and webinars available on FinGrad today and get ahead in your trading career. Join now!!
