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BHEL - Fundamental Analysis: Financial Health & Valuation

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Rating: 2.9

Last Updated Time : 02 Feb 26, 01:08 pm

Fundamental Rating: 2.9

Stock Code BHEL Market Cap 87,733 Cr. Current Price 252 ₹ High / Low 306 ₹
Stock P/E 110 Book Value 71.2 ₹ Dividend Yield 0.20 % ROCE 4.75 %
ROE 2.00 % Face Value 2.00 ₹ DMA 50 268 ₹ DMA 200 254 ₹
Chg in FII Hold 0.05 % Chg in DII Hold 1.08 % PAT Qtr 382 Cr. PAT Prev Qtr 368 Cr.
RSI 40.0 MACD -6.86 Volume 1,83,75,833 Avg Vol 1Wk 1,05,66,206
Low price 176 ₹ High price 306 ₹ PEG Ratio 15.2 Debt to equity 0.44
52w Index 58.6 % Qtr Profit Var 207 % EPS 2.30 ₹ Industry PE 35.4

💹 Financials: Bharat Heavy Electricals Ltd (BHEL) shows weak return metrics with ROE at 2.0% and ROCE at 4.75%, indicating poor capital efficiency. Debt-to-equity at 0.44 reflects moderate leverage. Quarterly PAT improved slightly from 368 Cr. to 382 Cr., but overall profitability remains low relative to its large market cap. EPS is only 2.30 ₹, highlighting weak earnings power.

📊 Valuation: The stock trades at a P/E of 110, far above the industry average of 35.4, suggesting significant overvaluation. The P/B ratio is ~3.5 (252/71.2), which is moderate but not justified given low returns. PEG ratio of 15.2 indicates valuations are stretched relative to growth. Dividend yield at 0.20% is negligible, offering little income return.

🏢 Business Model & Advantage: BHEL operates in the power equipment and heavy engineering sector, manufacturing turbines, boilers, and electrical systems. Its competitive advantage lies in government contracts and long-standing presence in India’s infrastructure development. However, the company faces challenges from private sector competition and global technology players.

📈 Overall Health: Financially stable but with weak profitability and poor return ratios. RSI at 40.0 suggests the stock is approaching oversold territory, while MACD at -6.86 indicates bearish momentum. Long-term fundamentals are challenged by low efficiency and high valuations, though government-backed demand provides some stability.

🎯 Entry Zone: Attractive entry closer to 200–220 ₹ range, near support levels. Current price of 252 ₹ is expensive relative to earnings. Long-term investors should be cautious, as growth visibility is limited and valuations are stretched.


Positive

  • Government-backed contracts provide demand stability.
  • Quarterly PAT improved by 207% YoY, showing recovery momentum.
  • DII holdings increased by 1.08%, reflecting domestic institutional support.

Limitation

  • Extremely high P/E (110) compared to industry average (35.4).
  • Weak ROE (2.0%) and ROCE (4.75%) indicate poor capital efficiency.
  • Low dividend yield (0.20%) offers minimal income return.
  • Moderate debt-to-equity ratio (0.44) adds financial risk.

Company Negative News

  • Profitability remains weak despite slight quarterly improvement.
  • High valuations not supported by earnings power.

Company Positive News

  • Quarterly PAT rose from 368 Cr. to 382 Cr., showing incremental improvement.
  • FII holdings increased slightly by 0.05%, reflecting marginal foreign investor confidence.

Industry

  • Power equipment and heavy engineering industry is cyclical, tied to infrastructure and energy investments.
  • Industry P/E at 35.4 indicates BHEL trades at a steep premium compared to peers.

Conclusion

BHEL remains a government-backed engineering giant with strong legacy presence, but weak profitability and poor return ratios limit its attractiveness. Valuations are stretched, making the stock risky for fresh entry. Investors should consider accumulating only near 200–220 ₹ levels for long-term holding, with cautious expectations on growth and returns.

Would you like me to also prepare a comparative HTML report against NTPC or L&T to highlight how BHEL stacks up against other infrastructure and power sector peers?

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