BHEL surges 10% on securing Rs 4,000-crore order from Adani Power's arm

Analyst believes 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.

Shares of Bharat Heavy Electricals Limited (BHEL) hit a 52-week high, and were frozen at the temporary 10 per cent upper circuit at Rs 111 on the National Stock Exchange (NSE) on Tuesday at 02:41 PM, after the company said it received an order from Mahan Energen (formerly known as Essar Power MP Limited), a wholly-owned subsidiary of Adani Power. The size of orders is approximately Rs 4,000 crore.

BHEL trades in the futures & option (F&O) segment, which has no circuit limits. A combined 66.19 million shares changed hands and there were combined pending buy orders for 4.3 million shares on the NSE and BSE.

BHEL in an exchange filing said, the orders is for supply of equipment (boiler, turbine, generator) and supervision of Erection & Commissioning for 2x800 MW power project based on supercritical technology at Bandhaura, Madhya Pradesh. Boiler and Turbine Generator are to be manufactured at BHEL’s Trichy and Haridwar plants respectively, the company said.

The supply of equipment - boiler, turbine, generator and associated auxiliaries along with control and instrumentation will be executed in 31 months. The supervision of erection & commissioning will be executed in 35 months.

Analyst at Prabhudas Lilladher believes, 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 40.4x/22.4x FY24/25E.

BHEL is an integrated power plant equipment manufacturer and is engaged in design, engineering, manufacture, construction, 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, Water, Oil & Gas and Deference & Aerospace.

Thus far in the financial year 2023-24, the stock has zoomed 61 per cent. While, so far in the current calendar year, it rallied nearly 40 per cent, as compared to 6.6 per cent rise in the S&P BSE Sensex.

According to CARE Ratings, the outlook for BHEL is expected to be stable for the medium term backed by virtue of its strong financial flexibility on account of Government of India holding of 63.17 per cent and the net external debt negative position of the company. Furthermore, healthy orderbook position with improved pipeline of thermal and industrial projects and increasing execution pace for the orders including revival of stuck orders shall continue to render stability to the risk profile of the company.

The ratings continue to account for the medium-term revenue visibility on the back of a healthy order book position backed by adequate order intake during FY23 and year to date FY24. Although the orderbook remains concentrated towards the power segment, the ratings factor the company’s demonstrated efforts towards diversifying the orderbook beyond the power segment indicated by the year-on-year improving inflows of orders from the industrial projects segment, the rating agency said in its rationale.