Should You Buy BHEL Shares After the Adani Power OrderRs Here’s What Analysts Say

Synopsis: BHEL's recent Rs11,000 crore contract with Adani Power has bolstered its order book, leading to divided opinions among analysts. While Antique Stock Broking remains bullish with a target price of Rs360, citing strong order inflows and potential for further re-rating, Prabhudas Lilladher and Kotak Institutional Equities are more cautious, maintaining lower target prices due to valuation concerns. Investors should weigh these perspectives carefully before making a decision.

Bharat Heavy Electricals Ltd (BHEL) has seen significant re-rating over the past year, primarily driven by strong order inflows, including a recent Rs11,000 crore contract with Adani Power Ltd for the construction of three supercritical thermal power projects in Rajasthan and Madhya Pradesh. This contract has generated optimism among market analysts regarding BHEL's future prospects, though opinions on the stock's valuation remain divided.

Antique Stock Broking maintains a positive outlook on BHEL, highlighting the sharp increase in thermal power plant order finalizations in FY25, with Rs28,000 crore worth of orders being secured in the power sector. The brokerage had previously upgraded BHEL to a 'Buy' in April, forecasting that the company’s annual average order inflow could exceed Rs60,000 crore between FY24 and FY27. They believe this momentum will continue, driven by large order pipelines in power, railways, defense, and renewable energy sectors.

Antique projects a cumulative order inflow of Rs2.2 lakh crore over FY24-26, which, along with accelerated execution of BHEL’s existing Rs1.4 lakh crore order book, could significantly enhance its operational performance, potentially leading to a 156% earnings compound annual growth rate (CAGR) over FY24-27. Despite the stock's considerable re-rating over the past year, Antique considers BHEL to be undervalued and sees further re-rating potential. They have maintained their 'Buy' recommendation with a target price of Rs360, based on a price-to-earnings (PE) ratio of 32 times their H1FY27 estimates.

On the other hand, Prabhudas Lilladher and Kotak Institutional Equities offer more cautious views. Prabhudas Lilladher acknowledges the strong order intake, which now stands at Rs31,300 crore year-to-date but maintains a 'Reduce' rating on the stock with a target price of Rs264, citing current valuations. Similarly, Kotak Institutional Equities holds a 'Sell' rating on BHEL with a fair value estimate of Rs100, indicating concerns over the stock's high current PE ratios of 85 times and 28 times projected FY25 and FY26 earnings per share, respectively.

Disclaimer: The information provided is for educational and informational purposes only and does not constitute financial advice. Investors should consult with their financial advisors before making any investment decisions.