BHEL shares near 52-week high after Q2, but CLSA questions 'quality of growth'

Shares of Bharat Heavy Electricals Ltd. (BHEL) gained over 5% on Thursday, October 30, after reporting their second quarter earnings on Wednesday, which were better than expectations on most parameters.

However, brokerage firm CLSA has an "underperform" rating on the stock, with a price target of ₹198 per share, implying a potential downside of 19.3% from its previous close of ₹245.39 apiece.

CLSA said, operationally, BHEL is turning a corner after two years of backlog-led growth, with the second quarter topline increasing 14% from the previous year, driving its earnings before interest, tax, depreciation and amortisation (EBITDA) to ₹580 crore compared to a loss in the September quarter last fiscal.

However, the brokerage is of the view that the quality of growth was not good as it was led by non-cash forex maket-to-market gains, which was the key factor behind the growth in the September quarter.

For the first half of financial year 2026, BHEL remained loss-making, as its losses had doubled during the June quarter compared to last year's profit.

A bright spot in BHEL's results was the resurgence of fossil orders, given India's focus on energy security, even as its thermal business orders peaked at 22 giga watt (GW) in FY25, according to CLSA.

While CLSA has an "underperform" rating, Morgan Stanley is "overweight" on the state-run company with a price target of ₹258, which is nearly the same price at which the stock currently trades at.

Of the 20 analysts that have coverage on the stock, eight have a "buy" rating, three have a "hold" rating and nine have a "sell" rating.

Shares of BHEL gained 5.3% to hit an intraday high of ₹258.5 apiece, inching towards its 52-week high of ₹272.1 per share.

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