First Read Bharat Heavy Electricals Q1FY27 - Strong execution drives overall beat

研报英文原文证据摘录

First Read Bharat Heavy Electricals Q1FY27 - Strong execution drives overall beat

Forecast returns

Forecast price appreciation 5.6%

Forecast dividend yield 0.7%

Forecast stock return 6.4%

Market return assumption 12.0%

Forecast excess return -5.6%

Company Description

Bharat Heavy Electricals (BHEL) focuses on the Indian power equipment business. Its main

customers are NTPC and state electricity boards. BHEL also services the power transmission,

captive power plant, industrial equipment, and transport segments. It is majority-owned by

the government of India.

Valuation Method and Risk Statement

We value BHEL based on a PE methodology.

We believe the key risks to our thesis are: 1) Slowing execution- Post the strong orders of the

past two years, we expect a pickup in execution which could drive a meaningful bottom-line

boost for BHEL. If the company fails to raise execution, it could delay the bottom-line

translation. 2) Change in government policy- Policy support has been a key driver of thermal

capacity additions. 3) Adverse changes in policy could impact growth- Solar with battery

storage could become cost effective. Thermal power remains necessary because solar and

wind are unable to provide consistent power supply. However, thermal power could become

redundant if solar plus battery cost of generation falls below that of thermal. 4) Commodity

risk- Sudden unexpected volatility in commodity prices could impact BHEL's costing of

existing orders and impact profitability. 5) Underperformance in the industrial segment- While

thermal is well placed to drive growth in the near-term, the longer-term pickup in other

segments, such as transmission, mobility and defence are critical for growth. If BHEL fails to

capitalise, longer term growth could be at risk.