Execution pickup likely to translate into further gains for BHEL's stock

As the only EPC major in the thermal projects space, Bharat Heavy Electricals (BHEL) has a growing order book. There’s an estimated 15 gigawatt (GW) of thermal capacity under tendering, and 30GW at the clearances stage. Given improved execution, BHEL could improve profitability from the third quarter of financial year 2025 (Q3FY25) and deliver annual growth of 34 per cent in revenues and 150 per cent in operating profit over FY24-26.

Despite the green focus, the government is aiming to add 93GW of thermal power capacity and BHEL is the only bidder across all tenders. Other prospective bidders like L&T, Thermax, GE Power, Toshiba, have shown less interest.

Presently 31GW of thermal power projects are under construction, 15 GW are in tendering and 30GW are under clearances with a target of adding 93GW by FY32. Thermal power plant order finalisation has seen an uptick in FY25 with Rs 34,000 crore of orders finalised.

BHEL’s annual average order inflow over FY24-27 will cross Rs 60,000 crore, given the pipeline in power and business opportunities in railways, defence, and renewable energy.

Brokerages expect a cumulative order inflow of Rs 2.2 trillion over FY24-26, which coupled with accelerated execution of the existing order book of Rs 1.5 trillion will improve operational performance.

BHEL received orders for 9,600 MW of thermal projects during FY24, a big jump over 1,320 MW during FY23. During FY25, it has already bagged orders for 10,400 MW of projects worth Rs 34,000 crore. The private sector (mainly Adani) has given 8,000 MW and the balance (2,400 MW) is from DVC (1,600 MW) and NTPC (800 MW). Bids for another 5,320 MW have been submitted.

The pace of execution is gradually picking up. The company has already completed around 20 per cent of BTG (Boiler, Turbine, Generator) supplies for Unit-3 of 2X800 MW Adani Power’s Mahan project. The order book includes 12 units of 800 MW sets (9,600 MW) from Adani Power. BHEL also announced winning an order worth Rs 6,100 crore (excluding taxes) from NTPC to set up 800 MW (1 x 800 MW) Sipat thermal power plant.

BHEL is favourably placed to win NTPC’s Darlipalli order (1x800 MW) worth Rs 11,100 crore, which would take order inflow to 11,200 MW for FY25. The pipeline looks healthy with NTPC projects like Meja (3 x 800 MW) expected to be finalised. Limited competition will be beneficial. If FY25 order inflow hits the projected Rs 70,000 crore, the order book will cross Rs 1.7 trillion.

In non-power segments, BHEL has a strong position in the railways where it supplies a diverse range of products and propulsion systems. BHEL, in consortium with Titagarh, has won an 80 train set order for Vande Bharat to supply propulsion units. The Indian Railways plans to order 4,500 Vande Bharat train sets by 2047 providing a long term business potential.

In defence, BHEL has capabilities in areas like guns for naval ships, systems, and power equipment, including steam and gas turbines for ships; armoured vehicles; missile systems and systems for aerospace. This may add to the order book.

BHEL’s PFBG (pressurised fluidised bed gasification) is highly suitable for treating coal with high ash content. It has signed MoUs with CIL and NLC to set up plants for these utilities and coal gasification will provide a growth opportunity. Assuming faster execution, the order book provides strong visibility over the next three years, a turnaround in the stock is very much on the cards.