BHEL Q3 Results: Brokerage firm says this government stock could fall by up to 73% after the results, 9 advise selling

News Topical, Digital Desk : BHEL Q3 Results: Negative sentiment remains on Bharat Heavy Electricals Ltd. (BHEL) stock following its third quarter (Q3) results. Brokerage firm Investec, one of the biggest bears on BHEL, has predicted a 73-74% decline in the stock.

Investec, in its report released on Tuesday, January 20, has maintained a 'Sell' rating on the stock and given a target price of ₹70, which is much lower than Monday's closing price of ₹263. 

Concerns over supply chain and execution Investec said the main reason for its negative opinion is potential difficulties in meeting execution timelines, particularly due to a weak supply chain. The report said, “Due to weak ordering during the financial year 2016 to 2023, many thermal power component vendors have shut down or exited the market. Even BHEL has stopped in-house manufacturing of many components in the last 10 years.” 

Kotak also bear, target ₹120 Kotak Institutional Equities is the second largest bear on BHEL. Kotak has a 'Sell' rating on the stock with a target of ₹120, which implies a downside of about 55% from current levels. Kotak has cut FY28 EPS estimates by 15%, factoring in slower execution, lower gross margin estimates, and a slight increase in employee expenses related to pay commissions. The brokerage also noted that average inventory levels remain elevated relative to earnings on a QoQ basis, posing a risk to the sustainability of other income reported in Q3. 

JPMorgan Warning: According to JPMorgan, BHEL's EBITDA margin has been extremely weak over the past decade. Between FY 2014 and FY 2025, the average EBITDA margin was 2.1%, while in FY 2021 it fell to -18%. JPMorgan noted that while BHEL has won most orders for coal-based power plants since COVID-19, caution is warranted given its long-standing track record of loss-making execution. Furthermore, most contracts have onerous payment terms, significantly shifting cash flow backward and significantly increasing working capital requirements, inventory, contract assets, and receivables. 

Nuvama Bullish, Expects Turnaround: On the other hand, Nuvama remains bullish on BHEL. The brokerage has maintained a 'Buy' rating on the stock and has a target price of ₹353, implying a 34% upside from current levels. Nuvama believes that after "kitchen sinking" in FY2026, FY2027 could prove to be a turnaround year for BHEL, where legacy burdens will be relieved and the benefits of operating leverage will begin to show. 

Overall Analyst Opinion: Of the 19 analysts covering BHEL, 8 have a 'Buy' rating, 2 have a 'Hold' rating, and 9 have a 'Sell' rating. 

Stock Status: BHEL released its December quarter results on Monday, which were better year-on-year but significantly weaker than analyst consensus estimates. The stock fell by nearly 3% after the results, though it later recovered 1% to close at ₹263. The stock has gained 21% in the past year.
 

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