The EPC contract is for design, engineering, manufacturing, supply, construction, erection, testing and commissioning with a project completion timeline of 70 months. BHEL also has an order worth ₹2,000 crore-2,500 crore for the design, manufacturing, supply, and supervision of eight gas turbine generator packages in the Dangote Industries Free Zone, Nigeria.
Given these order wins, BHEL has started FY27 well with over ₹23,000 crore added to the book. It is expected to win another ₹1.9 trillion orders by 2027-28 (FY28). The pipeline in the power sector is very robust with the Central Electricity Authority (CEA) projecting that installed generation capacity will rise to 1,121 GW by FY36 from the current 521 GW (January 2026) with an additional 174 GW and 880 GWh of energy storage.
Thermal coal capacity is forecast to grow from 228 GW to 315 GW (+87 GW), with 40.9 GW under construction, 22.4 GW awarded, and 16.4 GW under planning. The CEA noted that pit-head coal plants remain cost-competitive versus solar plus battery energy storage systems (BESS) for baseload supply. Nuclear capacity is forecast to rise from 8.8 GW to 22 GW, with 6.6 GW under construction and 7 GW in planning and a long-term target of 100 GW by 2047. Large hydropower capacity is forecast to hit 78GW. Assuming BHEL can improve execution, and operating leverage, its earnings could grow by multiples over this decade-long upcycle of building capacity. That is the basic investment rationale and analysts agree that earnings will accelerate.
The stock has comfortably outperformed the Nifty for over 6 months and seen valuation upgrades. But its financials and execution are not as solid as peers like Thermax which implies the immediate upside may not be as high as appears at first glance.
BHEL had a strong quarter in Q4FY26 with revenues of ₹12,300 crore, up 37 per cent year-on-year (Y-o-Y), along with earnings before interest, depreciation, taxes and amortisation (Ebitda) margin of 14.2 per cent (up 500 basis points Y-o-Y) due to better operating leverage. Ebitda was reported at ₹1,750 crore, up 145 per cent. BHEL reported gross margin of 34.8 per cent, a gain of 104 basis points Y-o-Y. Net profit at ₹1,280 crore was up 200 per cent Y-o-Y.
In FY26, BHEL added capacity of 8.9 GW. Order inflows in Q4 came in at ₹30,000 crore taking FY26 inflows to ₹76,000 crore. Power contributed 81 per cent of the inflows at ₹24,400 crore in FY26 while industry contributed 19 per cent at ₹5,400 crore. For FY26, power order inflows were ₹59,200 crore while industry contributed inflows of ₹16,500 crore. Around 80 per cent of the order backlog by March 2026 (₹1.92 trillion) comes from power, while 20 per cent at ₹43,300 crore is from industry. The order book grew by 22 per cent Y-o-Y to ₹2.2 trillion in FY26.
Contract assets were at ₹29,400 crore by March 26 with overall receivables at ₹38,300 crore, similar to March 25 and September 25. Cash flows improved with cash from operations up 4 times at ₹1,740 crore vs ₹380 crore in FY25, with net cash from operating activities at ₹5,840 crore vs ₹2,190 crore Y-o-Y. There is a big rise in free cash flow (FCF) at ₹5,240 crore vs ₹1,890 crore in FY25.
The Q1FY27 order wins are notable because it has been a difficult quarter due to the Iran war. However, other electrical capital goods firms like Siemens and ABB have also reported steady order accumulation. Demand is broad across infrastructure, real estate, quick commerce,mining, pharmaceuticals, and data centres.
Financial results are likely to see near-term margin compression and execution issues due to inflation and supply chain disruptions. But the long-term picture is one where the power sector continues to expand capacity through the next decade. Coal will remain critical for baseload and nuclear could take off. That provides opportunities for BHEL, provided it can deliver on the execution. Valuations could upgrade since BHEL is still at a discount to peers.
The writer is a New Delhi-based independent journalist
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