JM Financial Projects 45% Upside for BHEL Despite Short-Term Losses, While Kotak Warns of 60% Downside

Bharat Heavy Electricals Ltd. (BHEL) is currently drawing attention due to divergent views from brokerage firms. On one hand, JM Financial remains bullish, projecting a 45% upside for BHEL, with a target price of Rs 361 based on FY26 EPS. Their optimism is driven by:

• BHEL’s large order book: The company has received orders for 10 GW of projects worth Rs 35,100 crore in FY25, with 8 GW of active tenders and 39 GW of projects under clearance.
• Potential growth from operating leverage and better order mix, which is expected to improve sales and margins.
• The firm notes the oligopoly market in the thermal power space, despite competition from Larsen & Toubro (L&T), indicating market opportunities for BHEL.

However, Kotak Institutional Equities takes a contrasting view, suggesting a sell recommendation with a much lower target price of Rs 100, which would imply a 60% downside. Their outlook is based on:

• A projected net loss of Rs 201.2 crore for the September 2024 quarter, and an EBITDA loss of Rs 128.6 crore.
• Concerns over seasonally weak performance and negative EBITDA margins.

The stock is currently trading near Rs 254, with a market capitalization of Rs 88,500 crore, and has shown some volatility. While JM Financial emphasizes BHEL’s long-term potential driven by its strong order pipeline, Kotak Institutional Equities is more cautious, pointing to short-term challenges in profitability and margins. Antique Stock Broking also shares a positive stance, setting a target price of Rs 352.

The discrepancy in outlooks underscores the risk and potential reward for investors in the stock, especially amid competition from L&T in the thermal power space.

Disclaimer: The information provided is for informational purposes only and does not constitute financial advice. Stock market investments are subject to market risks, and past performance is not indicative of future results. Investors are advised to conduct their own research or consult with a qualified financial advisor before making investment decisions. The views expressed by JM Financial, Kotak Institutional Equities, and other brokerages are their own and should be evaluated based on individual risk tolerance and investment goals.