Why BHEL Share Price is Rising

Low-priced stocks have found a lot of takers these days.

IRB Infra, Jaiprakash Power, HCC and the likes...

Adding to the list is BHEL, a public sector undertaking (PSU) stock, that was up around 5% today.

In the past one year, the stock has gone up by 91%.

Let's find out the factors driving this uptrend.

#1 Quarterly Results

Last week, the company reported its Q2 results following which shares had fallen.

For the quarter under review, the state-owned engineering firm clocked a net loss of Rs 2.4 billion (bn) as against a profit of Rs 121 million (m) a year-ago.

The muted performance was due to higher raw material cost, other expenses and higher-than-average interest costs.

Today's rise can be attribute to healthy growth outlook that BHEL presents. You see, even as the company posted muted numbers for Q2, the engineering and power firm is still sitting on a heavy order book.

Market experts are of the view that given the healthy pipeline of thermal power orders and the moderation in receivables that BHEL's sitting on, the near-term outlook is bright.

The stock was in a momentum before it posted Q2 results and investors are once again showing buying interest after the fall it witnessed last week.

#2 Favourable Business Environment

Like any other business, BHEL faces concerns related to elevated inflation, higher interest rates, and geopolitical uncertainties. Despite these hurdles, it's supported by a strong domestic economy.

Industrial activity, measured by the index of industrial production (IIP), grew by an impressive 6.1% from April to August 2023.

What does this mean? It shows that industries are expanding capacity and growing, especially in sectors like cement, steel, and refinery.

This growth is driving a higher demand for capital goods, which is good news for BHEL.

#3 Expanding Order Receipts

A robust surge in the thermal power sector has translated into a healthy volume of bookings for BHEL.

The company's strong order book along with the favourable economic and industrial environment is contributing to a positive outlook for BHEL.

As of September 2023, BHEL's order book stood at Rs 1.14 trillion (tn), out of which around 71% orders are from power, 25% are from industry, and 4% are from abroad.

Out of these orders, large orders include the Vande Bharat project (80 train sets), thermal orders from NTPC and Adani group, and the hydro project orders from NHPC.

The company has a strong moat as it manufactures the entire range of power plant equipment.

As India has shifted focus towards renewables, BHEL is actively venturing into this arena for a more sustainable long-term strategy.

What Next for BHEL?

There is no doubt that orders are flying thick and fast and that the external environment has turned quite conducive for the company.

Besides, it has certainly taken some concrete steps to improve its own operations and financial management further.

In fact, if you listen to the management commentary at the end of the FY23 results, you are likely to come away impressed.

The top management is highly optimistic about the company's future.

Given the investments that are being made in power, railways, defence, private industry, things are definitely looking up for BHEL.

Going forward, the company is expecting orders from non-coal business segments including railways, defence, nuclear, emission control, transmission, and rural electrification segments.

For more, check out the below video where Co-head of Research at Equitymaster Rahul Shah shares his take on BHEL.

How Shares of BHEL have Performed Recently

On Monday, 13 November 2023, the stock opened marginally higher and quickly surged over 5%, outperforming the benchmark indices.

BHEL shares closed around 6% higher at Rs 136.6.

Over the last six months, the stock has delivered a remarkable return of 69.6%.

In the past one year, the stock is up over 90%, and looks set to achieve the multibagger feat.

At present, the stock is trading very close to its 52 week high of Rs 148.9.

About BHEL

BHEL is a leading manufacturer of power plants in India. The company's clients are in sectors like power, transmission, transportation, renewable energy, oil and gas, and defence.

Around 76% of its revenue comes from the power sector and the remaining 24% comes from other areas like renewables, defence, and aerospace.

To know more about the company, check out BHEL's financial factsheet and its latest quarterly results.

You can also compare BHEL with its peers -

BHEL vs Triveni Turbine

BHEL vs Thermax

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