BHEL Jumps 8% On Order Win From NTPC, Rallies Over 26% In 5 Days; Should You Buy?

Shares of Bharat Heavy Electricals Ltd. (BHEL) surged nearly 8 per cent on Friday, September 1, to hit a fresh 52-week high of Rs130.55 apeice on the National Stock Exchange, fuelled by investor optimism following improving trend in state-run company’s new order inflows.

The stock has remained undefeated over the past five trading sessions and gained over 26 per cent in this rally.

Today’s price action was accompanied by strong volumes as more than 4 crore shares traded on the NSE. The traded value of the shares stood at Rs 5,136.80 crore.

The stock was trading in an overbought zone with day’s RSI and MFI at 73.6 and 81.8 according to Trendlyne data. A number above 70 is considered to be an overbought zone for the stock. BHEL is also trading above its 50-day and 200-day Simple Moving Averages (SMA) according to Trendlyne data.

The multibagger stock has given 117 per cent  returns in the past 12 months and outperformed the Nifty50 by nearly 12-fold. The 50-stock index has returned 10% during this period.

Investors or traders willing to make a move must watch out for the volatility as the counter has traded with a 1-year beta of 1.2.

What Do Analysts Say?

According to analysts at Nuvama Research, the estimated value of the project is Rs10,000 crore to Rs 12,000 crore, taking its year-to FY24 order inflows to Rs30,000 to Rs 34,000 crore versus Rs 23,500 crore in FY23. Also, with the likely increase in demand for thermal power, there is a case for higher thermal capex and this bodes well for BHEL’s future earnings.

“Accordingly, we reckon fresh thermal ordering over the next four–five years at ~30GW, of which BHEL could bag 50 per cent  in our view. This implies ~3GW/year of thermal order inflow for BHEL, in addition to the base order inflow of Rs15,000–20000 crore, potentially driving an EPS CAGR of 83 per cent  over FY23–26E,” added the Nuvama report. EPS is earnings per share.

Lately, the company has been on an order bagging spree. On 25 August, BHEL won a Rs 2,242 crore order from NHPC Ltd for 12×240 MW electro-mechanical equipment, and a Rs 4,000 crore contract from Adani Power earlier last month. These orders are expected to contribute to a positive revaluation of the company’s stock.

Brokerage house Prabhudas Lilladher, said: “We believe, pickup in thermal power orders and companies focus on diversification in segments such as railways, defence, nuclear, hydro augurs well for company in long term. The stock is currently trading at PE of 46.8x/26.6x FY24/25E. We have Reduce rating on stock with Target Price of Rs 67.”