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BHEL Share Price Heats: 3 Key Drivers Behind the 300% Jump

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Just like the recent heatwave scorching the country, BHEL’s share price has been on the rise over the past year. The stock saw a surge of over 300%, with the price reaching a 52-week high of ₹319.20 on May 21, 2024. This is a stark contrast to its 52-week low of just ₹79.30 hit last year in May. So what could be the reasons fueling this drastic rise? Let’s see what the experts have to say. 

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                     Source: NSE

It’s interesting to note that BHEL’s share price reached a high of ₹319.20 just a day before releasing its quarterly results on May 21st, 2024. Following the release of the results on May 22nd, the share price opened lower at ₹305 compared to the previous close of ₹319.20. It even dipped further, dropping by nearly 7.6% to touch ₹295. However, this decline was short-lived. Investors seemed to regain some confidence later in the day, and the price recovered somewhat, settling around ₹304.50 by 9:20 AM.

Top 3 Reasons behind the rise in BHEL’s share price

Government Push for Infrastructure Development

A key factor driving BHEL’s stock price is the Indian government’s strong focus on infrastructure development. Experts believe increased spending on power, transportation, and other infrastructure projects has boosted the demand for BHEL’s products.

These include power generation equipment, boilers, and transmission lines.  With the government prioritizing infrastructure projects, BHEL is well-positioned to benefit from this increased spending.

Import Substitution and Atmanirbhar Bharat

The Indian government’s push for self-reliance (Atmanirbhar Bharat) has also played a role in BHEL’s stock market performance.  Experts believe a focus on import substitution has benefitted BHEL as a domestic manufacturer.  With a preference for locally produced equipment, BHEL could potentially see a rise in orders and production.

Improved Financial Performance (with a note of caution)

While BHEL’s recent financial performance hasn’t been stellar, there have been some positive signs. Experts point to a marginal increase in revenue from operations for the last quarter to reach ₹8,260 crore this quarter.

Additionally, the company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) witnessed a rise of 30.6% to ₹728 crore. This indicates a potential improvement in operational efficiency, which could be positive for the company’s future profitability. However, it’s important to note that net profit for the last quarter declined to ₹489.6 crore against a profit of ₹658 crore in the corresponding quarter last year. 

A Word of Caution

Despite the year-long surge, BHEL’s stock price did experience a dip after the company’s recent quarterly results. This could be due to a number of factors, including the aforementioned decline in net profit.  Experts advise investors to consider this recent drop and conduct thorough research before making any investment decisions.

Looking Ahead: A Market with Potential

The Indian power sector is expected to grow significantly in the coming years, with nearly 10 GW orders anticipated to materialize in FY25. This presents a major opportunity for BHEL, a dominant player in the sector. 

BHEL’s business performance is also expected to improve from FY25 onwards as the company recently secured better-margin orders that are entering the execution phase. This could lead to a sharp improvement in the company’s profitability. However, the company faces competition from both domestic and international players. 

Experts believe BHEL’s success will hinge on its ability to maintain its market share, improve operational efficiency, and navigate a competitive landscape.

The Final Word

While the reasons mentioned above paint a potentially positive picture, there are also factors to consider, such as the recent profit decline and market competition.  Investors should carefully weigh the risks and rewards before making any decisions. The above-mentioned information is some insights from experts, but remember, conducting your own research is crucial before entering the stock market.

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I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.

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