Shares of state-owned engineering giant Bharat Heavy Electricals Ltd (BHEL) witnessed a dramatic sell-off, tumbling nearly 15% over three trading sessions, as investors reacted to reports of a potential policy change that could reintroduce Chinese competition into India's power equipment sector.
The Trigger for the Sell-Off
The sharp decline commenced on 8 January 2026, when the stock plummeted 14% in a single day. This was triggered by media reports indicating that a government committee had recommended permitting Chinese manufacturers to bid for government contracts in the power sector. The core concern for the market was that this move could severely undermine BHEL's dominant position, particularly in the critical boiler-turbine-generator (BTG) segment.
Analysts Push Back Against the Panic
However, several brokerages and market experts believe the street's reaction may be excessive. They highlight that in the current volatile geopolitical climate, such a recommendation is unlikely to be implemented. Even if restrictions are eased, the practical impact on BHEL could be limited.
Systematix Shares and Stocks (India), in a report dated 12 January, noted that any relaxation would likely aim to ease supply-chain bottlenecks and improve project execution timelines, rather than foster intense competition from Chinese original equipment manufacturers (OEMs). The brokerage also pointed out that demand for Chinese equipment has diminished due to persistent quality concerns, high maintenance costs, and operational downtime.
BHEL's Fundamental Strengths and Outlook
Analysts are shifting focus to BHEL's strong fundamentals. The company boasts an order book of ₹2.2 trillion, as per its Q2FY26 earnings presentation, providing revenue visibility for over seven years. Just last week, BHEL secured a major ₹5,400-crore (excluding GST) contract for a coal gasification project in Odisha, underscoring its project-winning capability.
Order inflows have surged, reaching ₹92,000 crore in FY25, up from ₹78,000 crore in FY24. For FY26, ICICI Securities estimates inflows to remain close to the FY25 level. BHEL is a key beneficiary of the government's renewed focus on adding thermal power capacity to ensure energy security.
This bulging order book is expected to reverse years of subdued financial performance. After averaging a mere 3.4% Ebitda margin between FY23 and FY25, margins are projected to recover to 7% in FY26 and exceed 9% by FY27, driven by a pick-up in execution. The margin for the September quarter (Q2FY26) already stood at a healthier 7.7%.
According to Bloomberg consensus estimates, BHEL's earnings per share are forecast to skyrocket to ₹9.3 in FY27, a massive jump from an estimated ₹1.5 in FY25. The stock currently trades at about 28 times its FY27 price-to-earnings multiple. Analysts caution that sustaining such valuations hinges on the company's ability to execute orders efficiently and deliver on margin expectations.
