3 days ago
State-owned Bharat Heavy Electricals Ltd. (BHEL) is extremely overvalued, with a fair value below ₹100 per share, according to Sanjeev Prasad, Managing Director and Co-Head at Kotak Institutional Equities.
The price target of ₹100 per share on BHEL implies a potential downside of nearly 50% from the current market levels.
Prasad said that many midcap and smallcap stocks remain priced for perfection despite slowing growth. He cautioned that challenges persist in these segments, predicting further downside.
"Some PSU railway and metal stocks continue to trade at extreme valuations," Prasad commented on the market downturn, citing Rail Vikas Nigam Ltd. (RVNL) as an example of overvaluation in the SMID segment, which still trades at eight times its book value.
He further said that foreign capital inflows are unlikely to return soon, as India faces a dual challenge—limited allocations to emerging market (EM) funds and an increasing preference for Chinese markets.
Prasad expects Nifty earnings growth of 14.5-15% in FY25, driven by select public sector undertakings (PSUs).
BHEL shares remained in focus on Monday after it announced that it has received an order worth Rs 6,700 crore from Singareni Collieries Company (SCCL) to establish an 800 MW thermal power unit in Telangana.
The contract covers BHEL's responsibilities for design, engineering, manufacturing, supply, erection, commissioning, and civil works, according to a company statement.
BHEL's Net profit climbed 170% to ₹124 crore, while its revenue grew by 32% from last year to ₹7,277 crore. Although revenue was a beat, the net profit was a miss on analyst estimates of ₹175 crore.
BHEL's Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), grew by 40% to ₹304 crore, while margin expanded 30 basis points to 4.2% from 3.9% last year. The margin expansion was kept in check due to a steep jump in other expenses.
BHEL's order inflow surged by 167% from last year to ₹6,860 crore, while its order book grew by 47% year-on-year to ₹1.6 lakh crore.
Out of the 17 analysts that have coverage on BHEL, eight have a 'Sell' rating on the stock, seven recommend 'Buy', while two have a 'Hold' rating. JM Financial has the highest target on BHEL at ₹358, while Incred has the lowest at ₹38.
Shares of BHEL are trading 0.87% lower on Monday at ₹191.62. The stock has fallen 18% so far in 2025.
