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Hidden Gem: Bharat Heavy Electricals Ltd (CMP: ₹440 Target Price - ₹575, Rating - Buy) (Upside:30%)

ICICIdirect Research 18 Jul 2026 DISCLAIMER

BHEL is one of the largest engineering and manufacturing company of its kind in India engaged in design, engineering, construction, testing, commissioning, and servicing of a wide range of products and services with over 180 product offerings to meet the ever-growing needs of the core sectors of economy.
Revenue mix (FY26):  Power (~75% revenue mix), and Industrial (~25) sector largely in India.
Order book : BHEL received strong order inflow of ₹26,745 crore in Q1FY27 and outstanding order book stood at ~₹2.60 lakh crore (book to bill 7.6x of FY26 revenue) provides medium to long-term revenue visibility across multiple years of execution, with nearly 81% of the order book anchored in the power segment. Non-thermal businesses (17% of order book) continue to scale with sizeable order books in Transportation (~₹15,000 crore), Transmission (~₹14,000 crore), Nuclear (~₹12,000 crore), Coal Gasification (~₹8,000 crore) and Defence (~₹7,000 crore).
Execution : BHEL's turnaround is gaining momentum, with Q1FY27 revenue rising 40% YoY to ₹7,698 crore, while EBITDA turned positive at ₹735 crore and PAT at ₹382 crore, reflecting the benefits of higher execution and improved project profitability. We believe margins are at the beginning of a structural upcycle, Notably, peak execution is likely to be witnessed over FY27–FY28E, as the sizeable order inflows received during FY23–FY24 enter the execution phase.
We expect BHEL to achieve order inflows of over ₹70,000 crore in FY27, supported by a robust pipeline across thermal power, nuclear, transmission, defence and industrial businesses and EBITDA margin to expand from 6.9% in FY26 to 11.5% by FY28E.
Revenues and PAT to grow at CAGR of ~31% and 90% over FY26-FY28E. we assign BUY rating to BHEL with target price of ₹575 (based on 35x on FY28E EPS).
Thermal opportunity : The order inflow momentum is expected to sustain as the CEA has outlined a thermal capacity addition target of ~97 GW by FY35, with incremental demand from replacement of ~37 GW of ageing thermal plants that will cross 35 years of life by FY32.
Nuclear Power Opportunity: BHEL is a key domestic supplier for India’s PHWR nuclear programme, including steam generators, turbines, and reactor equipment. India has announced a major nuclear expansion plan under the “Nuclear Energy Mission for Viksit Bharat” with a dedicated allocation of ₹20,000 crore in Union Budget FY26 for development of Small Modular Reactors (SMRs) and advanced nuclear technologies. The mission targets deployment of at least 5 indigenously developed SMRs by 2033 and scaling India’s nuclear capacity to 100 GW by 2047 vs current ~8 GW levels creating ₹20 lakh crore+ investment opportunity across reactors, turbines, heavy engineering, EPC and the domestic nuclear supply chain.
 
 

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