BHEL's thermal power orders surge to 1.7 trillion

Bharat Heavy Electricals Ltd (BHEL) has seen its shares rise by 6% since the announcement of a major order worth 7,500 crore for an 800 MW thermal power project. This order increases BHEL's total order book to 1.7 trillion, which is five times its revenue over the past year. The rise in orders comes as the government increases its focus on thermal power, hoping to address rising energy shortages. Currently, BHEL's power generation equipment orders make up over 75% of its total orders. The company has seen a significant increase in order inflows this fiscal year, totaling 68,500 crore compared to 78,000 crore last year. This marks a big improvement from previous years, where average order inflows were only 20,000 crore. BHEL has been supported by a shift in government energy policy that promotes both renewable and thermal power. Projects under development now promise better margins due to their larger capacities and advanced technology. The company is also expanding its work in transmission projects and railway-related activities, suggesting continued order growth ahead. However, despite the positive outlook, BHEL struggles with low profit margins. Its earnings before interest, taxes, depreciation, and amortization (Ebitda) margin stands at just 2%, compared to competitors like L&T, which has an 8% margin. Faster execution of projects and improvements in operational efficiency will be essential for shareholder confidence. Experts project that BHEL could experience significant earnings growth in the coming years, supported by expected order inflows of 3 trillion. Still, to ensure long-term growth, the company needs to consider entering the solar equipment market to diversify away from thermal power dependency.