Synopsis: BHEL shares fell over 5% today after multiple brokerages grew cautious after the Q3 results, highlighting concerns about execution and margins. Now, there’s genuine uncertainty about whether the recent rally can continue.
The shares of this leading Mahartana PSU stock declined sharply in today’s trade after notable brokerage firms, Kotak and Investec, flagged significant downside in the stock price of the company, citing numerous business concerns. In this article, we will try to understand the rationale behind this downside.
With a market capitalisation of Rs 88,392 crore, the shares of Bharat Heavy Electricals made a day low of Rs 248.85 per share, down 5.5 percent from its previous day’s closing price of Rs 263.05 per share. Over the past five years, the stock has delivered a robust return of 574 percent, outperforming NIFTY 50’s return of 77 percent.
Reason behind the fall
The fall in share prices of BHEL can be attributed to multiple brokerages like Kotak and Investec flagging disappointments in the company’s recent underperformance in Q3.
Investec, a notable brokerage house, has maintained its “Sell” rating on BHEL and assigned a target price of only Rs 70, which signals a massive downside potential of 73 percent from its previous day’s closing price.
According to Investec, it believes that the company will have trouble completing projects on schedule, mainly because its supply chain isn’t very strong right now. From FY16 to FY23, orders declined, and many vendors who produced thermal power parts either closed down or exited the industry. Additionally, BHEL stopped manufacturing some components in-house over the past decade, which only adds to the delays.
Adding to this concern, Kotak Institutional Equities also maintained its “Sell” rating on BHEL and assigned a target price of Rs 120 (down from Rs 125 earlier), which signals a significant downside potential of 54 percent from its previous day’s closing price.
Kotak mentioned that it lowered its price target on BHEL after the company reported a weak Q3 FY26. Sluggish project execution, lower gross margins, and subdued cash flows all hurt the results. However, the EBITDA miss was modest, only by 2 percent, mainly because other expenses were less than anticipated.
It also added that order inflows stayed stable at about 1.25 times quarterly revenue. But with the weak operating performance and the expectation that order inflows may slow, they revised their future estimates downward.
The brokerage also slashed its FY28 EPS estimate by 15 percent. They attributed this to ongoing execution challenges, uncertainty over provisions, and the possible impact of the 8th Pay Commission, which could raise employee expenses. Kotak also cited risks to its previous 12 percent EBITDA margin forecast for FY28.
Financials
The consolidated revenue from operations for BHEL stood at Rs 8,473 crore in Q3 FY26, up from Rs 7,277 crore in Q3 FY25, which is a growth of 16 percent YoY. Additionally, on a QoQ basis, it reported a growth of 13 percent from Rs 7,512 crore.
Coming down to its profitability, the company’s net profit stood at Rs 390 crore in Q3 FY26, up from Rs 135 crore in Q3 FY25, which is a staggering growth of 190 percent YoY. Additionally, on a QoQ basis, it reported a net profit of Rs 375 crore, which is a minor growth of 4 percent.
BHEL’s order pipeline stayed strong, with order inflows of over Rs 45,900 crore up to Q3 FY26, led by the power segment (76 percent), while the industry including exports, contributed 24 percent. As of 31 December 2025, the company’s outstanding order book stood at over Rs 2,22,800 crore, dominated by power (80 percent) and industry including exports (20 percent), indicating strong visibility led mainly by the power business.
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