Is BHEL Entering A Turnaround Phase After Legacy Drag?
About BHEL And Current Operating Phase
BHEL reported strong revenue growth in Q3 driven by improved execution, even as profitability remained under pressure due to accelerated completion of low-margin legacy projects. Brokerages broadly agree that FY26 is a clean-up year, with FY27 expected to mark the start of operating leverage.
India’s focus on energy security and thermal capacity additions continues to underpin BHEL’s order inflows, providing long-term revenue visibility.
Key Q3 And Brokerage Takeaways
🔹 Revenue grew ~16% YoY on execution ramp-up.
🔹 EBITDA margins declined due to legacy project mix.
🔹 Order inflows surged, lifting backlog sharply.
🔹 FY27 expected to benefit from operating leverage.
Traders tracking PSU capital goods may manage volatility through a Nifty Intraday Call during order-flow driven moves.
Order Book And Execution Snapshot
| Metric | Update |
|---|---|
| Order Backlog | ~₹2.2 lakh Cr |
| Thermal Orders | 7 GW+ annually |
| Revenue Growth Q3 | ~16% YoY |
Execution quality and margin mix are expected to improve as legacy orders taper off over the next few quarters.
Strengths🔹 Dominant position in power equipment 🔹 Strong order backlog visibility 🔹 Beneficiary of energy security push |
Weaknesses🔹 Near-term margin pressure 🔹 Execution of legacy projects |
Margin normalisation will be gradual and closely linked to the pace of legacy order completion.
Opportunities🔹 Fresh thermal and defence orders 🔹 Operating leverage from FY27 |
Threats🔹 Cost overruns on legacy projects 🔹 Slower execution cycles |
Consensus expects FY27 to mark a cleaner earnings base with improved profitability metrics.
Valuation And Investment View
BHEL’s long-term visibility remains strong, but near-term valuation comfort hinges on margin recovery execution. Investors may hedge PSU exposure through a tactical BankNifty Intraday Call during broader market swings.
Investor Takeaway
Derivative Pro & Nifty Expert Gulshan Khera, CFP®, believes BHEL is transitioning from a clean-up phase to a potential operating leverage cycle. Investors should track execution discipline, margin trajectory, and order conversion pace before drawing re-rating conclusions. Structured insights are available at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on BHEL And PSU Capital Goods
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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.
