Apr'25 View on Bharat Heavy Electricals Ltd

Bharat Heavy Electricals Ltd is an integrated power plant equipment manufacturer engaged in design, engineering, manufacture, erection, testing, commissioning and servicing of a wide range of products and services for the core sectors of the economy, viz. Power, transmission, Industry, transportation, renewable energy, Oil & Gas and defence.[1] It is the flagship engineering and manufacturing company of India owned and controlled by the Govt. of India. • BHEL’s strong execution (32% yoy growth) and gross margins (volatile print) were negated by higher other expenses. • Aggregate order inflow in the power sector is aligned with our estimates for FY25. • Working capital has potentially improved on lower inventory and receivables. • We broadly retain our FY27 estimates & revise FV to Rs115 (Vs Rs110) on roll-forward. • Other expenses deteriorated by 620 bps qoq, resulting in flat EBITDA margin qoq. • Our DCF assumes the medium-term run-rate of power ordering of BHEL of 10-15 GW will eventually decline.