BHEL shares fall 4% despite Q2 profit jumping 119% YoY. Should you buy, sell or hold?
ETMarkets.comBHEL shares slip despite strong earnings as brokerages raise targets.
BHEL reported a 24% year-on-year (YoY) increase in consolidated revenue from operations to Rs 9,300 crore in the September 2026 quarter, compared to Rs 7,512 crore in the corresponding quarter last year. Net profit more than doubled, rising 119% YoY to Rs 821 crore from Rs 375 crore a year ago.
Following the results, brokerage firms Nuvama Institutional Equities and JM Financial Institutional Securities maintained their ‘Buy’ ratings on the stock and raised their respective target prices, citing improved execution, expanding margins and a favourable outlook for profitability.
Nuvama raises BHEL target price
Nuvama Institutional Equities retained its ‘Buy’ rating on BHEL and raised its target price to Rs 540 from Rs 530, valuing the stock at 38 times its estimated FY28 earnings per share (EPS).
According to the brokerage, BHEL reported strong execution in Q2FY27, with revenue increasing 24% YoY. EBITDA margin expanded by 330 basis points year-on-year to 11%, significantly exceeding the consensus estimate of 8.5%. The improvement was driven by a 590-basis-point expansion in gross margin to 36.5%, reflecting the ramp-up in execution of newer orders secured at better prices.
However, fresh order inflows declined 85% YoY, taking the company's order book to Rs 2.6 lakh crore, equivalent to 7.6 times its FY26 revenue.
Nuvama expects execution-led margin expansion to support BHEL’s profitability over the coming years. It projects EBITDA margin to reach 13.8% by FY29 and estimates a compound annual growth rate (CAGR) of 53% in EPS between FY26 and FY29. The brokerage has cut its FY27 EPS estimate by 12% in view of management’s commissioning guidance, which implies power capacity growth of 11.9% in the second half of FY27. At the current market price, Nuvama estimates BHEL is trading at 39 times, 33 times and 29 times its FY27, FY28 and FY29 estimated earnings, respectively.
JM Financial maintains Buy
JM Financial Institutional Securities also maintained its ‘Buy’ rating on BHEL and revised its target price upward to Rs 535 from its earlier estimate, valuing the stock at 30 times its estimated September 2028 EPS.
According to JM Financial, BHEL’s Q2FY27 revenue stood at Rs 9,300 crore, up 24% YoY and 21% quarter-on-quarter (QoQ), exceeding the brokerage’s estimates by 3%. Gross margin improved to approximately 37%, expanding 595 basis points YoY and 536 basis points QoQ. Consequently, EBITDA margin increased by 330 basis points YoY and 448 basis points QoQ to 11%, ahead of both the brokerage’s estimate of 7.5% and the consensus estimate of 8.6%.
Net profit rose 119% YoY and 118% QoQ to around Rs 800 crore, exceeding JM Financial’s estimate by 61% and the consensus estimate by 31%. Segment-wise, revenue from the power business grew 17% YoY, while the industry segment reported 45% growth. EBIT margins in the power and industry segments improved to 13% and 19.5%, respectively.
JM Financial also highlighted an improvement in working capital, with the working capital cycle at 141 days compared with 164 days in FY26. This was supported by stronger collections, which rose 33% YoY to Rs 13,200 crore, helping reduce interest expenses to Rs 120 crore from Rs 200 crore in Q2FY26.
The brokerage noted that BHEL announced capital expenditure of Rs 500 crore and resumed hiring after a gap of nearly 15 years. The company’s order book stood at Rs 2.6 lakh crore, while its net cash position was approximately Rs 4,600 crore.
Considering the improvement in execution and gross margins, JM Financial raised its EBITDA margin estimates for FY28 and FY29 to 13.2% and 15%, respectively, from its earlier projections of 12.2% and 14.3%. The brokerage believes the promising thermal power project pipeline and the company’s net cash position support its positive outlook on the stock.