BHEL Q2 Earnings Preview: Strong order book and revenue growth set optimistic tone

BHEL’s consolidated revenue is anticipated to see healthy growth, largely fueled by robust execution across its Power and Industry segments. Zee Business forecasts a 12.5 per cent year-on-year increase in revenue to Rs 5,772.5 crore from Rs 5,125 crore. Additionally, brokerage PL Capital is even more optimistic, predicting a 21.80 per cent rise to Rs 6,242.60 crore.

According to Zee Business, BHEL’s revenue growth stems from its strong performance in power and industrial orders, coupled with significant order book execution. PL Capital further attributes the revenue boost to BHEL’s streamlined operational focus and efficiency in delivering projects.

Margins supported by operating leverage

Both Zee Business and PL Capital forecast improvements in BHEL's EBITDA margins. Zee Business projects a positive EBITDA of Rs 87 crore, marking a stark contrast from last year’s EBITDA loss of Rs 388 crore. This positive turn is attributed to operating leverage and a better order mix, which have helped BHEL keep costs under control. PL Capital expects a 780 basis point improvement in margins, primarily due to employee cost leverage and reduced administrative costs.

Kotak Institutional Equities is more conservative, projecting a negative EBITDA margin of 2.1 per cent, with an adjusted loss of Rs 201.20 crore. They attribute this projection to seasonality, while also factoring in gross margins consistent with the full-year figures for FY2024.

Profitability outlook and loss reduction

For BHEL’s bottom line, Zee Business estimates a profit of Rs 14 crore compared to a Rs 238 crore loss year-over-year. In contrast, PL Capital forecasts a narrowing loss, estimating a deficit of Rs 42.40 crore, down from Rs 233.40 crore last year. Kotak Institutional Equities also predicts a loss but is aligned with a gradual improvement in BHEL’s financial trajectory, driven by better order execution.

BHEL recorded strong order inflows in Q2 FY25, totalling over Rs 30,500 crore. Key wins include Rs 13,300 crore from Damodar Valley Corporation (DVC) for Koderma thermal power station, Rs 11,000 crore from Adani Power, and Rs 6,200 crore from NTPC for the EPC of Sipat thermal power project. As of YTDFY25, BHEL has secured 10 GW in project orders and is actively tendering for another 8 GW, expected to finalize by March 2025, according to JM Financial.

Key areas to watch

BHEL’s Q2 results will focus on:
- Order inflow remains pivotal, with strong activity in thermal power and defence.
- Timely delivery is essential to maintain revenue growth.
- Margins and cost efficiencies will be key drivers of overall profitability.

With a steady pipeline, sectoral backing, and operational improvements, BHEL’s Q2 earnings are poised to reflect a solid recovery path for the PSU.