Shares of Bharat Heavy Electricals Ltd (BHEL) declined over 5 per cent on Tuesday after the company announced its December quarter results, with investor focus shifting from strong headline profit growth to margin pressures and execution challenges highlighted by brokerages.
BHEL reported a standalone net profit of ₹382.49 crore for the quarter ended December 2025, a sharp rise from ₹124.77 crore in the corresponding quarter last year. The improvement was driven by higher revenues and better operating performance compared with the year-ago period. However, the stock failed to sustain gains as the market reacted to concerns around profitability and near-term margin headwinds.
JM Financial said BHEL reported consolidated revenue of ₹84.7 billion in Q3FY26, up 16 per cent year-on-year, though slightly below expectations. EBITDA margins came in at 6.4 per cent, lower than estimates, primarily due to higher raw material costs and elevated employee expenses following provisions linked to new gratuity norms.
According to JM Financial, profit after tax was broadly in line on a year-on-year basis, aided by stronger-than-expected other income. The brokerage noted that management is currently focused on completing 10.2 GW of pre-Talcher projects by 2026, which is weighing on margins. However, it highlighted that 10.9 GW of post-Talcher projects have begun execution and are expected to support margin expansion as equipment supplies ramp up.
JM Financial remains positive on BHEL’s long-term outlook, citing limited risk from Chinese imports and a strong pipeline in thermal power, and continues to maintain a buy rating with a revised target price of ₹355.
Nuvama Institutional Equities said BHEL’s Q3FY26 performance missed consensus profit estimates by a wide margin despite healthy revenue growth of 16.4 per cent year-on-year. The brokerage attributed the miss to a sharp contraction in gross margins, which fell to 30.8 per cent, driven by accelerated execution of low-margin legacy projects.
Nuvama highlighted that order inflows remained strong, rising 53 per cent year-on-year to ₹10,500 crore , taking the order backlog to around ₹2.2 trillion, equivalent to nearly eight times FY25 sales. While it has cut its FY26 earnings estimates to factor in continued pressure from legacy projects in the second half of the year, the brokerage believes FY27 could mark a turnaround. It expects the absence of legacy drag, improving execution mix and operating leverage to aid profitability, while thermal order inflows are seen sustaining above 7 GW annually.
Nuvama has retained its buy rating on the stock with an unchanged target price of ₹353.
The stock closed 5 per cent lower at ₹250.15 on the NSE, hitting a low of ₹248.75, against the previous close of ₹263.10