Bharat Heavy Electricals Ltd. share price target

Thermal equipment ordering is scaling the summit. In our view, it would be overly hasty to write an obituary for thermal or coal-based power yet.

BHEL reported order inflow (OI) of ~INR 200bn (YTD) while the outlook for OI for remainder of the fiscal remains strong. BHEL has commended 100% market share in the orders for thermal power plants in FY24 and Q1FY25.

Bharat Heavy Electricals Ltd. (BHEL) reported an order inflow (OI) of INR 780bn, 3x YoY. OI for the quarter was INR 420bn. FY24 saw strong order inflows worth INR520bn in power owing to 9.6GW thermal order wins and Industry orders worth INR 220bn.

BHEL has posted strong order inflow of INR 335bn in H1FY24 (>2x YoY) on the back of large order wins. However, we believe, this is the beginning of pickup in order inflow as India is likely to order more than 55GW of coal based thermal capacity in the medium term (Link), and given the duopoly nature of the market, BHEL is its natural beneficiary.

Ridiculed. Opposed. Self-evident – the three stages of all incontrovertible ideas. We have arrived at the third stage of the idea that adding thermal capacity is receiving almost universal acceptance. India needs additional thermal capacity – we were of the firm belief that India needed to increase additional supply to ensure a smooth energy transition while the street has been –ve on coal capacity addition.

BHEL reported its highest quarterly order inflow of INR 145bn in Q1FY24 and is L1 in ~INR 80bn worth of orders. We expect order inflow for FY24E and FY25E to be >INR 400bn aided by improving order prospects for thermal coal. We believe India needs to add 5GW per year for next 15 years.

The headline embodies a design principle (introduced by US Navy in 1960), which means that design for any system should be simple and elegant. Likewise, India’s power grid needs a simple solution like thermal power to ensure its reliability, which is currently challenged by the increasingly varying availability of renewable electricity.

Bharat Heavy Electricals’ (BHEL) Q4FY23 revenue grew 2% YoY to Rs82bn, wherein power revenue was up 4% YoY to Rs62bn while industry revenue remained flat YoY at Rs16.5bn.

Bharat Heavy Electricals’ (BHEL) Q3FY23 revenue grew 2.5% YoY to Rs52.6bn, led by 7% YoY growth in power segment, which was offset by 21% YoY decline in industrial segment revenue.

Bharat Heavy Electricals’ (BHEL) Q2FY23 revenue grew 2% YoY to Rs52bn, led by 6.4% growth in power segment to Rs38bn.

Bharat Heavy Electricals (BHEL) during FY22 witnessed improvement in execution as most covid-related challenges abated.