Will BHEL’s Margin Story Sustain Beyond One-Off Gains?
About the Quarter and Margin Context
Bharat Heavy Electricals Ltd (BHEL) reported a strong quarter with 14% YoY revenue growth, though most margin gains were aided by foreign exchange benefits and provision reversals. Excluding these one-time adjustments, gross margins remained stable around 31%. The company continues to execute older, loss-making projects, which are expected to persist through FY26 before a genuine operating margin recovery materializes by FY27.
BHEL’s outlook is currently balanced between near-term execution risks and a promising medium-term opportunity in domestic power equipment and industrial capex. The order book remains strong, and the pickup in private and renewable energy projects offers medium-term visibility. For investors tracking index-linked industrials, our Nifty Expiry Tip updates provide short-term insights on cyclical stocks like BHEL, L&T, and NTPC.
Key Financial Metrics
| Metric | Q2FY26 | YoY Change |
|---|---|---|
| Revenue | ₹8,650 Cr | +14% |
| EBITDA | ₹1,030 Cr | +8% |
| EBITDA Margin | 11.9% | +40 bps |
| PAT | ₹612 Cr | +18% |
Peer Comparison
| Company | Revenue (₹ Cr) | EBITDA Margin (%) | P/E (x) |
|---|---|---|---|
| BHEL | 8,650 | 11.9 | 36 |
| L&T | 56,250 | 12.4 | 41 |
| Siemens India | 5,780 | 13.6 | 82 |
SWOT Analysis
| Strengths | Dominant domestic presence, diversified portfolio across power and industrial segments |
| Weaknesses | Execution delays, dependency on government projects, aging order backlog |
| Opportunities | Shift towards renewable energy, new defence manufacturing verticals |
| Threats | Price-based competition, rising input costs, forex volatility |
Investment Verdict
BHEL’s short-term performance remains supported by order execution and one-offs, but sustainable profitability will depend on phasing out legacy projects. Investors can consider accumulating gradually for the medium term (12–18 months) while awaiting tangible improvement in core operating margins.
Investor Takeaway
Gulshan Khera, CFP®, Nifty Expert and SEBI Registered Investment Adviser at Indian-Share-Tips.com, believes BHEL’s FY27 outlook could mark a turning point once margin normalization begins. For now, investors should remain selective, focusing on execution progress and order mix.
Explore detailed industrial analysis at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on Power Equipment Stocks
- What drives BHEL’s margin recovery in FY27?
- Is BHEL still attractive compared with Siemens and L&T?
- Which power equipment stocks are best for long-term holding?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
