Multibagger Midcap Defence PSU Stock BHEL Skyrockets 14% On Rs 3,500 Crore Order From Adani Power

On Thursday, June 6, Bharat Heavy Electricals Ltd (BHEL), the state-owned company's shares hit the upper circuit limit of 10% early in the trading session. This surge followed the announcement of a significant Rs 3,500-crore order from Adani Power to establish a 1,600 MW Thermal Power Plant (TPP) in Raipur, Chhattisgarh.

By around 10 am, BHEL's stock was trading 14% higher at Rs 290.70 on the Bombay Stock Exchange (BSE), showcasing a remarkable leap of confidence from investors. Over the past six months, the company's stock has soared by 63%, and an impressive 250% over the last year on the BSE.

BHEL's recent exchange filing revealed the details of the lucrative deal with Adani Power Ltd (APL). The contract involves setting up a 2x800 MW TPP, with BHEL responsible for manufacturing the boilers and turbine generators at its plants in Trichy and Haridwar, respectively. The project has stringent timelines, requiring the supply of Unit-1 within 35 months and Unit-2 within 41 months.

The nature of the order encompasses the supply of critical equipment including the Boiler, Turbine, Generator, and associated auxiliaries along with control and instrumentation. Additionally, BHEL will supervise the erection and commissioning of the plant, ensuring the project quality.

This order reflects BHEL's robust manufacturing capabilities and its significant role in India's power sector. The company's extensive experience and expertise are important in handling large-scale power projects.

The announcement of the Adani Power order comes on the back of a volatile session on Wednesday, where BHEL's stock closed 3.70% higher at Rs 255.25. However, the stock had previously slipped 21% from its all-time high of Rs 322.35, recorded on May 21, 2024.

Despite this recent dip, BHEL's long-term performance remains strong. The stock has a one-year beta of 1.1, indicating higher volatility compared to the market. Currently, it stands above the 50-day, 100-day, 150-day, and 200-day moving averages but is lower than the 5-day, 10-day, 20-day, and 30-day averages. The day's Relative Strength Index (RSI) of 39.4 suggests that the stock is neither overbought nor oversold, hinting at potential stability or continued growth.

The company has also secured a significant contract from Mirzapur Thermal Energy (UP) Private Ltd to construct a 2x800 MW thermal power project at Mirzapur Phase I, in Uttar Pradesh. This contract is also valued at over Rs 3,500 crore, further boosting BHEL's order book and future revenue prospects.

However, the company's recent financial performance has shown mixed results. In the fiscal fourth quarter, BHEL reported a 26% decline in net profit year-on-year, dropping to Rs 489.6 crore from Rs 658 crore. Despite this decline in profitability, revenue from operations saw a modest increase of 0.4%, reaching Rs 8,260.3 crore, up from Rs 8,227 crore in the corresponding period of the previous fiscal year.

This contrast in financial performance highlights the challenges BHEL faces in balancing profitability with revenue growth. The company's ability to secure large-scale orders like those from Adani Power and Mirzapur Thermal Energy indicates strong operational capabilities.

The significant rise in BHEL's stock price reflects strong investor confidence in the company's future prospects. As of 10:25 am on the National Stock Exchange (NSE), the shares were trading with gains of more than 13% at Rs 289.65 per share. Over the past year, the stock has delivered returns exceeding 240%, with nearly a 50% rise in 2024 alone. The three-year performance is equally impressive, with the stock surging nearly 275%. All these gains have been recorded on the NSE.

BHEL's resurgence can be attributed to its focus on securing large and lucrative contracts, robust manufacturing capabilities, and a strong order book. These factors combined suggest a promising outlook for the company, despite the challenges posed by fluctuating profits.

As BHEL continues to capitalize on opportunities within the power sector, investors are likely to remain bullish on the stock. The company's ability to deliver on high-value projects and maintain operational excellence will be critical in sustaining this momentum.