Valuations factor in bright prospects for BHEL; order book on positive side

Management guidance was that demand for coal-based thermal power has picked up due to higher demand for power

Analysts seem to be generally pessimistic about Bharat Heavy Electricals (BHEL). Out of 15 brokerages with recommendations since May this year, two have ‘buy’ while five have ‘sell’ and eight have ‘underweight’/’reduce’/’underperform’/’hold’ recommendations.

The average target price of the public sector undertaking (PSU) is Rs 61. However, the stock has been consistently hitting new highs, which indicates that there is some kind of valuation mismatch.

On the positive side, there is a strong order book and a gradual revival of thermal tendering. The order book stands at over Rs 91,000 crore, which is 4 times the