BHEL (BHEL IN) – Q1FY27 Result Update – Strong Q1; further execution ramp-up on cards – REDUCE

We revise our FY27E/FY28E EPS estimate by +5.4%/+5.8% accounting for improvement in execution and normalization in provision. BHEL delivered a strong Q1FY27 performance, with revenue growing 40% YoY and EBITDA margin expanding to 6.5%, supported by lower other expenses. The Power segment (~52% YoY) remained the key growth driver, backed by execution of a healthy order book of ~INR1.9trn. Recent order wins, including the INR210bn EPC award for the 3×800MW Meja thermal power project and BHEL's largest-ever export order (~INR22.5bn) for generator packages for the Dangote refinery, have taken the Power segment order book to ~Rs2.1trn. Along with the current pipeline, opportunities in nuclear, coal gasification and green hydrogen are expected to provide new growth avenues. The Industrial segment reported ~12% YoY revenue growth, with order inflows of ~INR17.7bn driven by transmission, O&G and transportation, while opportunities across HVDC & Green Energy Corridors, defence and rail mobility are expected to drive incremental order inflows and strengthen diversification across end markets. BHEL offers strong multi-year revenue visibility, with robust execution momentum and sustained investments in India's power and infrastructure sectors expected to support future growth. The stock is currently trading at P/E of 44.2x/29.6x on FY27E/FY28E. We maintain our ‘Reduce’ rating on the stock given recent rally in the stock price, with a TP of Rs368 (Rs321 earlier) valuing the stock at a PE of 25x Mar’28E (23x Sep’28E earlier) owing to better execution.