BHEL Buy Or Sell? Analysts raise targets but remain divided between bulls and bears after Q2

Analysts tracking state-run Bharat Heavy Electricals Ltd. (BHEL) are split right down the middle on whether to be bullish or bearish on the stock after its September quarter results, that surpassed analyst estimates by a wide margin.

21 analysts have coverage on BHEL, of which nine analysts each have a "buy" and "sell" recommendation on the stock, while three others have a "hold" recommendation.

BHEL A Buy Or Sell?

Global investment banking firm Macquarie has upgraded BHEL to "neutral" from "underperform" earlier, with a price target of ₹420.

At ₹2.5 lakh crore, and a growth of 17% from last year, Macquarie called BHEL's order backlog strong and raised its estimates for the stock given the continued traction in execution and margin expansion.

UBS remains "neutral" on BHEL but has raised its price target on the stock to ₹500.

The firm called BHEL's order inflows during the quarter as "weak", due to the absence of large thermal orders.

Jefferies has maintained its "underperform" recommendation on BHEL with a price target of ₹335, which implies a downside potential of 28% for the stock.

The firm said in its note that BHEL's industry segment margins have surprised with a 420 basis points expansion, while the power segment saw a 250 basis points expansion.

BHEL's Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) estimates for financial year 2027-2030 have been raised 17% by Jefferies, to factor in the 595 basis points gross margin improvement seen during the quarter.

However, Jefferies said that it prefers T&D equipment players like Hitachi Energy and Siemens Energy to play the power upcycle, instead of BHEL.

CLSA too has an "underperform" rating on BHEL with a price target of ₹351.

The firm reiterated its bearish stance due to the entry of Chinese Suppliers, JSW Toshiba, L&T and Thermax into its core thermal equipment segment, which will raise a question on its market dominance.

Additionally, CLSA believes that BHEL's order backlog also appears to have peaked with the stock pricing in a lot more than the current scenario.

BHEL's margin improvement drove CLSA to raise its financial year 2027-2029 Profit After Tax (PAT) estimates by 10% to 11%.

The stock is up 8% over the last month in anticipation of a strong quarter despite the lack of orders and therefore, CLSA believes that a strong second quarter is priced in but at 39 times its financial year 2028 estimated earnings, the stock is expensive.

Shares of BHEL ended 5% higher on Wednesday at ₹464. The stock is now up 60% so far this year.