BHEL Defies Market Slump: Share Price Surges on Strong Q2 Results and Robust Order Book

Bharat Heavy Electricals Ltd. (BHEL) has been catching investors’ attention with its impressive Q2 earnings, leading to a rise in its share price despite dip in the frontline indices. With a profitable quarter and better-than-expected margins, BHEL’s stock remains resilient, trading in the green and displaying robust financial health. Here’s a deeper look at the reasons behind this upward movement in BHEL’s share price.

Strong Q2 Results Drive Share Price Up

BHEL reported a net profit of Rs 96.7 crore for the quarter ending September, a significant turnaround from the previous year’s loss of Rs 58.3 crore in the same period. This unexpected profitability, coupled with improved operational efficiency, pushed BHEL’s share price up as investors responded positively. Motilal Oswal noted that BHEL’s Q2 results exceeded estimates, mainly due to a stronger-than-anticipated margin performance.

Key Highlights of Q2 FY25:

• Revenue Growth: Driven by a solid order book of Rs 74,600 crore, revenue growth was stronger than expected.
• EBITDA and Margins: EBITDA turned positive, reaching Rs 275 crore, with a margin of 4.2%, a substantial improvement from last year’s EBITDA loss of Rs 153.3 crore.
• Segment Performance: Revenue from the power segment rose to Rs 5,028.8 crore, while the industry segment’s revenue surged to Rs 1,556 crore, reflecting significant growth across BHEL’s core segments.

A Strategic Turnaround: Factors Behind Profitability

BHEL’s profitability this quarter is particularly noteworthy as it comes without the support of extraordinary income, which had boosted previous quarters. This time, the company focused on operational improvements and cost management. Additionally, a change in accounting policy and reduced other expenses by ₹234 crore contributed to a leaner, more profitable quarter, further stabilizing BHEL’s share price.

Order Book Strength: The Engine Behind Revenue Growth

A key highlight of BHEL’s is its outstanding order book, valued at Rs 1,60,000 crore. This strong pipeline provides revenue visibility for upcoming quarters and supports long-term growth expectations. The order book’s strength instills confidence in investors, as evidenced by the share price maintaining an upward trend even when the broader market is subdued.

Trade Receivables: Managing Risks Amidst Global Challenges

BHEL’s trade receivables include an overdue of Rs 211 crore from STPG, a customer in Sudan, impacted by the ongoing civil unrest. Despite these geopolitical challenges, BHEL has not provisioned this overdue, showcasing a firm stance on managing receivables. This approach highlights BHEL’s resilience and its capacity to navigate complexities without compromising profitability, which positively impacts its share price.

Share Price Performance in 2024: A Promising Trend

In 2024 so far, BHEL’s share price has risen by 18.83%. As the company continues to bolster its financial stability, its stock remains a bright spot in the public sector undertaking (PSU) space, offering a promising outlook for shareholders.

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