Bharat Heavy Electricals Ltd’s (BHEL’s) shares have risen 20% from a 52-week low of ₹56.20 in early February. Lower valuations, along with a pickup in order books and operating margins, have helped the stock. But note that BHEL is still at about half the levels it was two years ago.
At a price-to-earnings multiple of around 12 on FY21 estimated earnings, the stock trades way below its decadal average of 20. Even the 0.6 times book value is near historical lows.
The stock is getting some support on the premise that fresh orders, revenue and margins can only improve. December quarter Ebitda (earnings before interest, tax, depreciation and amortization) margin at 3.6% is better than the year-ago period’s 1.6%. FY19 forecast from brokerage firms ranges from 4.5% to 5.6%.
