BHEL rides thermal power revival—can it keep up with demand?
Source: Live Mint
Bharat Heavy Electricals Ltd (BHEL) shares have risen 6% since Friday, when the company announced a ₹7,500 crore order win for an 800 MW thermal power generation project. This brings the company’s total order book to ₹1.7 trillion—5x the trailing twelve-month revenue.
With a swelling order book and a renewed focus on thermal power capacity additions, timely execution will be key to meeting deadlines and maintaining a competitive edge.
Read this | BHEL’s fortunes poised for revival as order book fills up on demand for coal-fired power
Power generation equipment dominates BHEL’s order book, accounting for over three-fourths of total orders, while exports remain marginal at 2% and industry-related orders make up the rest. The company’s order inflows in FY25 so far stand at ₹68,500 crore, compared to ₹78,000 crore in FY24—a sharp jump from the ₹20,000 crore average seen during FY21-23.
The state-owned equipment manufacturer has benefitted from the government’s energy policy shift over the past two years to support both renewable and thermal power rather than focusing solely on renewables. This change was driven by a sharp rise in power shortages during non-solar hours.
Moreover, the power plants currently under construction offer higher margins for BHEL, as they feature larger capacities (660 MW and 800 MW) and advanced supercritical technology that enhances fuel efficiency.
The company is also gaining momentum in other segments, such as transmission, where it recently secured a major order—awarded last month in partnership with Hitachi Energy India Ltd—to build a nearly 1,000 km high-voltage direct current (HVDC) line along with substations and associated infrastructure. Additionally, it is seeing momentum in railway-related projects.
The company expects the order momentum to continue, with several large projects in the pipeline.
“With limited competition in the power equipment manufacturing space, BHEL stands to meaningfully benefit from the opportunity,” said an Antique Stock Broking report dated 24 March. It projects BHEL to report an earnings growth of 149% CAGR over FY24–27, backed by projected cumulative order inflows of ₹3 trillion and accelerated execution of existing orders.
Yet, BHEL has much catching up to do with Ebitda margin at just 2% during 9MFY25, compaerd to 8% for L&T’s EPC business.
Also read | India’s power grid facing warnings due to sudden dip in solar power generation
Thus, faster execution and improvement in operating leverage hold the key to investor sentiment. The stock trades at 21x FY27 earnings, as per Bloomberg consensus. BHEL must also craft a strategy to enter the fast-growing solar equipment market to reduce reliance on thermal power and drive long-term growth.
