BHEL (BHEL IN) – Q4FY26 Result Update – Healthy Q4; execution momentum remains monitorable – Downgrade to ‘REDUCE’

We revise our FY28E EPS estimate by +7.8% accounting for improvement in execution and normalization in provision. BHEL delivered a strong Q4FY26 performance with revenue growth of 36.9% YoY, driven by robust execution of its order backlog, while EBITDA margin expanded 499bps YoY to 14.2% supported by lower other expenses. The Power segment remained the key growth driver, with ~54% YoY revenue growth backed by execution of a healthy order book of ~INR1.7trn, while order book further strengthen by recent key order win of INR135bn EPC package (3×800MW) from NTPC in Q4. BHEL has successfully commissioned 8.9GW of power capacity in FY26 reinforcing its positioning in the thermal space. The Industrial segment witnessed some moderation in growth, although order inflows remained healthy (~INR54bn) driven by across sectors such as transmission, transportation, process industries and industrial equipment. Recent easing in localisation norms for HVDC (LCC) is expected to support execution of key HVDC projects. With a robust order book of ~INR2.4trn, BHEL offers strong multi-year revenue visibility; however, sustained execution momentum and provision numbers remain a key monitorable. The stock is currently trading at P/E of 40.4x/27.0x on FY27E/FY28E. We roll forward to Mar’28E and downgrade the stock from ‘Hold’ to ‘Reduce’ given the recent rally in stock, with a TP of Rs321 (Rs245 earlier) valuing the stock at a PE of 23x Mar’28E (22x Sep’27E earlier). Downgrade to ‘Reduce’.