PSU stock falls 10% in two sessions after net loss widens in Q1; Check price target

Shares of Bharat Heavy Electricals Ltd. (BHEL) fell as much as 5% on Thursday, August 7, after the company reported disappointing Q1FY26 results, with largely flat revenue growth at ₹5,490 crore.Margins remained under pressure. Gross margin was flat YoY at 29.2%, but operating profit margin (OPM) declined 670 basis points YoY to -9.8% due to a sharp 98% jump in other operating expenses. Net loss widened to ₹450 crore from ₹210 crore a year ago, with PAT margin slipping 440 bps YoY to -8.3%. Other income rose 69% YoY to ₹190 crore.

On the positive side, order inflows surged 42% YoY to ₹13,400 crore, taking the order backlog to ₹2.04 lakh crore, about 7.2 times FY25 sales.

Brokerages dividedHong Kong-based brokerage firm CLSA maintained an ‘Underperform’ rating with a price target of ₹198. It highlighted that Q1 execution rose just 4% YoY, missing consensus expectations, despite hopes of a turnaround following two years of backlog growth. The stock currently trades at 45x FY26CL price-to-earnings.

In contrast, Nuvama Institutional Equities retained a ‘Buy’ rating, citing the strong momentum in fresh thermal power orders.

It believes BHEL could benefit from a near-monopoly (90%+ market share) in the segment, and may bag another 17GW of orders over the next 2-3 years.
However, Nuvama trimmed its FY26E/FY27E EPS estimates by 15%/5%, lowering its price target to ₹335 (from ₹360 earlier), factoring in execution delays.Nuvama expects EPS to grow from ₹1.5 in FY25 to ₹13.4 by FY27E, backed by a strong order book (80% power mix) and a pipeline of 25-30GW over the next 18-36 months.

Key factors to monitor

– Timely execution of the existing backlog

– Growth in non-thermal segments such as railways, defence, and hydrogen

– Commissioning of legacy projects

– Pace of execution of new thermal power projects (TPPs) won in the last 18 months, expected to be delivered by FY27

Of the 19 analysts that have coverage on BHEL, eight of them continue to have a ‘Sell’ rating on the stock, three have a ‘Hold’ recommendation, while other eight have a ‘Buy’ rating.

Shares of BHEL are off the day’s high and are trading with losses of 4.70% at ₹228.56. The stock has fallen 11% in the last one month.