1:2 Bonus, 1:5 Split, 38 Dividends: Not Tata Steel, But BUY This Maharatna PSU Stock For Rs 361 Target; Why?

Maharatna PSU giant in the heavy electrical equipment business, BHEL share price witnessed heavy buying on September 24, due to the bullish stance of brokerages on the company. JM Financial believes BHEL is going to regain profitable growth ahead owing to a growing order book and limited competitive environment. Meanwhile, broker Antique Stock Broking believes BHEL's operational performance leading to a potential 156% earnings CAGR over FY24-27E.

Both brokers have recommended BUY for a target of Rs 361, hinting at a nearly 28% potential upside ahead.

BHEL Share Price:

BHEL's stock price ended at Rs 282.30 apiece, up by 2.97% on BSE with a market cap of Rs 98,298.65 crore. YTD, BHEL shares are up by 42%.

Since August 2001, the company delivered 38 dividends. In the last 12 months, the dividend amount stood at Rs 0.2 per share. Current, dividend yield is at 0.09%.

Moreover, in October 2011, BHEL shares turned ex-split in the ratio of 1:5, where the face value of Rs 10 was cut to Rs 2 per share. Also, the company carried its first bonus issue of 1:2 ratio in June 2007.

BUY BHEL Share Price:

JM Financial On BHEL Share Price:

Power deficit during non-solar hours is increasing. New drivers of power demand (data centres, electrification of industry, manufacturing, EVs and households' electrification) are gradually changing historical demand trend lines. India is likely to see a power deficit from FY26 onwards. Government is in firefighting mode and plans to add 93 GW of thermal power generation capacity by FY32. Amidst this, BHEL is the only EPC player for new thermal projects.

With a growing order book (bagged 1.3GW/ 9.6GW/ 10.4GW during FY23/ FY24/ YTDFY25), a limited competitive environment (15 GW under tendering, 30GW under clearances) and, pick-up in execution, we anticipate BHEL to regain its profitable growth trajectory from 3QFY25 and to deliver Revenue/EBITDA/PAT CAGR of 34%/150%/233% over FY24-26E. We continue to maintain the BUY on the stock with a TP of INR 361 (40x FY26EPS) supported by healthy ordering, improving execution and the benefit of operating leverage.

Antique Stock Broking On BHEL Share Price:

Bharat Heavy Electricals (BHEL) announced winning a large order worth INR 61 bn (excluding taxes) from NTPC to set up 800 MW (1 x 800 MW) Sipat. thermal power plant (stage III). Thermal power plant order finalization has witnessed a sharp uptick in FY25 with INR 340 bn worth of orders getting finalized in the power sector. We had upgraded BHEL to BUY rating (April 17, 2023 with a TP of INR 72) arguing that its annual average order inflow over FY24-27E will cross INR 600 bn, which is getting played out since FY24.

We believe the ordering momentum should continue, given the large order pipeline in the power sector coupled with robust business opportunities expected to materialize in the fast-growing sectors such as railways, defence, and renewable energy. We expect a cumulative order inflow of INR 2.2 trn over FY24-26E, which coupled with the accelerated execution of the existing order book of INR 1.5 trn, to significantly improve BHEL's operational performance leading to a potential 156% earnings CAGR over FY24-27E.

The stock has meaningfully re-rated over the last one year, yet we believe that the stock is inexpensive and has the potential to re-rate further. We maintain BUY with a target price of INR 361, based on a PE of 32x its 1HFY27E earnings.

BHEL is India's largest engineering and manufacturing enterprise, operating in the energy, industry and infrastructure sectors. The company was established in the year 1964 and since then it has been "Making in India" offering comprehensive products, systems, and services in various areas including power generation (thermal, hydro, gas, nuclear, and solar PV), transmission, transportation, defence, aerospace, oil and gas, and emerging sectors like battery energy storage systems and electric vehicle chargers. BHEL has a pan-India presence with 16 Manufacturing Units and 140+ project sites (including overseas).