BHEL share price may reach ₹125: Nuvama

Due to minimal competition and a near-term thermal capex resurgence, domestic brokerage Nuvama Institutional Equities has raised Bharat Heavy Electricals Ltd (BHEL) to a ‘buy’ rating and retained it on its “braveheart” list. The firm raised the target price by 47%, from 85 to 125 rupees. According to brokerage, the stock might rise by more than 30% from its current levels.

According to the brokerage’s research, macroeconomic tailwinds could contribute to a possible thermal recovery. Furthermore, it noted that recent discussions with power sector officials have restored confidence in higher capital expenditures and tenders for both renewable energy—RE—25-30 GW in FY24—and thermal energy—25 GW by FY28.

When solar power is absent in the evenings, thermal capacity increases RE because plant load factors (PLFs) may ramp up to meet demand.

According to the brokerage’s study of India’s National Electricity Plan (NEP), about 24GW of new thermal capacity is expected to be operational by FY32 (ordering is expected to commence in FY27-28) in order to avoid a power shortfall.

This implies thermal ordering of 4-5GW/year during FY24-30E, or nearly a threefold increase over the 2017-22 period. NTPC intends to purchase 6GW of this by March 2024. Despite forays into the industrial, railroad, and defense sectors, BHEL’s revenue mix in FY23 was almost 75% made up of the power segment.

“As a result, we anticipate a new thermal capex cycle beginning in FY24 and lasting at least three to four years.” Replacement of existing older facilities may delay the ordering cycle past FY30,” according to the brokerage.

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