BHEL shines on order inflows, but execution needs to catch up too

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₹35,000 crore. “We believe with domestic thrust towards manufacturing and the company’s efforts towards improving its balance sheet, BHEL’s business can stage a strong turnaround given its strong technical track record," said analysts at ICICI Securities in a report on 20 September. Plus, limited competition—the other key company being Larsen & Toubro Ltd—brightens BHEL’s prospects.

Sure, strong order inflows imply better earnings trajectory in the long run. But, in the near term, a key concern is the company’s weak execution. In the June quarter, BHEL’s consolidated revenue rose by 7% year-on-year, but the Ebitda loss widened to ₹364 crore from ₹170 crore in the same period last year.

Ebitda is earnings before interest, tax, depreciation, and amortization, a key profitability measure. It helps that the company is entering other sectors such as railways, renewable energy and defence. In the June quarter, it won a Vande Bharat order for 80 train sets in a consortium with Titagarh Rail Systems Ltd.

Currently, the BHEL stock trades at nearly 27 times its FY25 estimated earnings, shows Bloomberg data. This appears pricey given that BHEL’s execution track record in recent years has been uninspiring. Moreover, the fruits of the orders recently won are yet to be seen.