Bharat Heavy Electricals Limited (BHEL) is one of the Indian PSUs, which plays an important role in the energy and infrastructure sector. Recently, Kotak’s Sanjeev Prasad has given an important statement regarding BHEL shares. He says that BHEL is a prime example of extreme overvaluation. This statement has become a topic of discussion among investors and market experts. What is overvaluation? Overvaluation means that a company’s share price exceeds its actual value or potential growth. This situation usually arises when investors get overly excited and start buying a stock without any solid basis. This may result in a sudden decline in stock prices when actual financial performance does not meet expectations. Commenting on the fall in the market, Prasad said, “Some PSU railway and metal stocks are trading at excessive valuations. He cited Rail Vikas Nigam Limited (RVNL), which is still trading at eight times its book value, as an example of overvaluation in the SMID segment. He further said that foreign capital inflows are unlikely to come back soon, as India faces a dual challenge—limited allocation to emerging market (EM) funds and increasing preference for Chinese markets. Prasad expects Nifty earnings to grow by 14.5-15% in FY25, driven by select public sector undertakings (PSUs). According to the company statement, the contract includes BHEL’s responsibilities for design, engineering, manufacturing, supply, construction, commissioning and civil works. BHEL’s net profit rose 170% to ₹124 crore, while its revenue rose 32% to ₹7,277 crore from last year. Although revenue increased, net profit fell short of analysts’ estimates of ₹175 crore. BHEL’s earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 40% to ₹304 crore, while margins expanded 30 basis points to 4.2% from 3.9% last year. Margin expansion was kept in check due to a sharp jump in other expenses. BHEL’s order inflow grew 167% from last year to ₹6,860 crore, while its order book grew 47% year-on-year to ₹1.6 lakh crore. Of the 17 analysts covering BHEL, eight have a ‘sell’ rating on the stock, seven have a ‘buy’ recommendation, and two have a ‘hold’ rating. JM Financial has set a highest target of ₹358 on BHEL, while InCred has set a lowest target of ₹38. Regarding this news, Adya Lovely, company secretary (CS) of Deloitte, spoke, “Since BHEL is owned by the government, this leads to a perception among investors that it is a safe investment. Its business is closely tied to power and infrastructure, which are cyclical in nature. This leads to fluctuations in revenue and profitability, causing violent market valuation. However, I would say investors should keep in mind that BHEL’s shares are highly volatile; hence, it can be risky.”
Reporting for True To Life News Media Pvt. Ltd.