BHEL share price surges 3%; Morgan Stanley says firm's turnaround could continue to surprise markets

The state-owned company on Monday posted a two-fold jump in consolidated net profit to ₹1,290.47 crore during the quarter ended March 31, supported by growth in revenues.

It had reported a net profit of ₹504.45 crore in the same period a year ago, the company said in an exchange filing.

During the fourth quarter, its total income surged to ₹12,553.50 crore from ₹9,142.64 crore seen in the January-March period of the preceding 2024-25 financial year.

For the entire FY26, the company's net profit jumped to ₹1,600.26 crore from ₹533.90 crore seen in the year-ago period.

The board of the company also approved a final dividend of ₹1.40 per share of ₹2.00 for the fiscal year ending March 31, 2026. BHEL is India's largest engineering and manufacturing enterprise in the energy and infrastructure sectors.

Analysts remain divided on BHEL, even as the stock has delivered a sharp rally in recent months on the back of the energy security theme and improved operational performance.

CLSA

CLSA noted that while BHEL’s FY26 revenue grew 19% year-on-year and EBITDA margins expanded by 255 basis points to 6.9%, the quality of growth remains weak.

The investment firm pointed out that gross margins declined 150 bps, with margin expansion largely driven by lower non-cash provisions and forex gains.

It also flagged valuation concerns, with the stock trading at a steep 51.2x FY27 estimated earnings, while order inflows appear to have peaked in FY25.

JP Morgan

JPMorgan is cautious, citing the stock’s sharp outperformance — up 58% over the past year and 38% in the last three months, compared to declines in the NIFTY 50.

The leading financial services firm believes the business remains deeply cyclical, particularly as the peak of the thermal power ordering cycle appears to be behind.

BHEL’s FY26 order inflows declined 19% year-on-year, with power segment orders down 27%, and further moderation is expected in FY27.

JPMorgan also cautioned that the rise of energy storage systems and cheaper solar power could pose long-term risks to coal-based power demand.

Morgan Stanley

Morgan Stanley, on the other hand, remains constructive with an ‘overweight’ rating and a higher target price of ₹444, citing improving macro positioning and signs of a sustained turnaround.

The firm highlighted strong Q4 performance, including a 54% year-on-year growth in power segment execution, margin expansion, and robust operating cash flows.

It expects continued improvement driven by better execution, consistent margins in the power segment, and improved receivables, which could enhance cash flow conversion.