Bhel JM

04 September 2023 India | Industrials | Initiating Coverage
Bharat Heavy Electricals Ltd | BUY

Steam blowing, again
With the increasing incidence of energy and peak power shortages in India, ordering for Sudhanshu Bansal
sudhanshu.bansal@jmfl.com | Tel: (91 22) 66303128
thermal power projects is about to rebound in a meaningful way over the next 3-4 years.
Along with a revival in thermal capex, BHEL will also benefit from its strategic diversification Darshan Gangar
darshan.gangar@jmfl.com | Tel: (91 22) 62241879
into non-power businesses in recent years. It is transforming itself into a diversified
engineering company with fast-growing areas like railways, defence, and renewable energy
driving long-term sustainable growth. We expect the company to deliver
Revenue/EBITDA/PAT CAGR of 17%/76%/91% respectively over FY23-26E supported by
healthy ordering, improving execution and the benefit of operating leverage. We initiate
coverage on the stock with a BUY rating and a TP of INR 165 (23x Sep’25E earnings).
 Thermal capex to revive: Increasing peak power deficit, the incidence of power shortages, Recommendation and Price Target
multiple policy interventions, declining load factor, changing buyer-seller dynamics at Current Reco. BUY
power exchange, unusual corporate actions and many other recent events signal building Previous Reco. NR
Current Price Target (12M) 165
stress in the power demand-supply equation. We expect the beginning of large capex in
Upside/(Downside) 18.8%
coal-fired power plants which has been muted for a long time. Assuming that BHEL Previous Price Target 0
maintains its historical 70-80% market share, and limited competition (L&T being the Change NA
other), the trajectory of new order inflows bodes well for significant improvement in the
company’s performance with 70% of revenue contribution from new power projects. Key Data – BHEL IN
Current Market Price INR139
 Signs of successful diversification: Recent wins of four propulsion systems for Vande Market cap (bn) INR483.1/US$5.8
Bharat Trainsets, 80 Vande Bharat Sleeper Trainsets, scale-up of defence orders, Free Float 27%
Shares in issue (mn) 3,482.1
increasing visibility on coal gasification and opening of new opportunities from pumped
Diluted share (mn) 3,482.1
hydro projects are helping the company successfully diversify its business. 3-mon avg daily val (mn) INR3,326.0/US$40.2
 Cost pressure to ease: Some of the current power projects under construction, viz., 52-week range 141/55
Sensex/Nifty 65,628/19,529
3x800MW Patratu (INR 117bn) have back-ended payment terms that have been a source
INR/US$ 82.7
of working capital stress for the company. Going forward, we believe that the pain of
high debtors will ease FY25 onwards with the commissioning of a large number of Price Performance
projects during FY24-26. Additionally, with the changing business mix in favour of EPC % 1M 6M 12M
contracts, material cost (FY23/26 - 74%/64%) for the company is slated to moderate in Absolute 40.2 85.7 134.0
Relative* 40.4 69.3 111.2
2-3 years.
* To the BSE Sensex
 Management rejig: BHEL will see a complete change in directors on the board including
the chairman during CY23. The determination to turn around its low performance and
task-oriented actions from the internally-grown new CMD (he being head of the
company’s operations) will aid the company in turning around its performance.
 Initiate with a BUY: With rising traction in thermal capex revival and fructification of
diversification initiatives by the company, we expect BHEL to report an average annual
order intake of INR c.460bn during FY24-26E, >1.5x against the long-term average of INR
c.275bn booked during FY14-23. Earnings could grow significantly over the next 3 years,
given strong operating leverage and better execution. We expect the company to deliver
Revenue/EBITDA/PAT 3-year CAGR of 17%/76%/91% respectively over FY23-26E. We
initiate coverage on the stock with a BUY rating and a target price of INR 165, (based on
a 23x Sept’25E EPS).
Financial Summary (INR mn)

Y/E March FY22A FY23A FY24E FY25E FY26E
Net Sales 2,01,533 2,21,363 2,67,813 3,24,195 3,60,635
Sales Growth (%) 23.7 9.8 21.0 21.1 11.2 JM Financial Research is also available on:
EBITDA 7,377 7,166 5,807 19,967 40,289 Bloomberg - JMFR <GO>,
EBITDA Margin (%) 3.5 3.1 2.1 5.9 10.7
Adjusted Net Profit 4,635 4,774 4,074 16,498 34,288
Thomson Publisher & Reuters,
Diluted EPS (INR) 1.3 1.4 1.2 4.7 9.8 S&P Capital IQ, FactSet and Visible Alpha
Diluted EPS Growth (%) 0.0 3.0 -14.7 305.0 107.8
ROIC (%) 1.8 1.8 1.0 5.2 10.4 Please see Appendix I at the end of this
ROE (%) 1.7 1.8 1.5 6.0 11.6
report for Important Disclosures and
P/E (x) 103.7 100.7 118.0 29.1 14.0
P/B (x) 1.8 1.8 1.8 1.7 1.6 Disclaimers and Research Analyst
EV/EBITDA (x) 61.9 65.3 80.7 24.5 11.9 Certification.
Dividend Yield (%) 0.3 0.3 0.3 1.0 2.1
Source: Company data, JM Financial. Note: Valuations as of 04/Sep/2023
JM Financial Institutional Securities Limited

Bharat Heavy Electricals Ltd 04 September 2023
Table of Contents Page No.
BHEL: Steam blowing, again 2
The rally has just begun! 4
Investment Rationale 5
 Thermal capex to revive
 Working capital stress is about to ease
 Material cost is likely to moderate
 Productivity of manpower is slated to improve
 Management rejig
 Large and diversified orders’ inflow is increasing
 Beyond Thermal
How we got here? 13
Connecting the dots 17

 Dot#1: Demand pattern is shifting
 Dot#2: Annual System Load Factor is declining
 Dot#3: Extreme weather events creating supply uncertainty
 Dot#4: Deficit (peak power & energy) increasing, slowly & steadily
 Dot#5: Increasing incidences of power outages
 Dot#6: Unprecedented action by CERC
 Dot#7: Buyer-seller relationship at power exchange is changing
 Dot#8: Repeated imposition of Section-11
 Dot#9: Retirement of old thermal power plants is delayed
 Dot#10: JSW Energy is not signing PPA
 Dot#11: Tit-bits
 Dot#12: ‘Powerful’ & ubiquitous similarities with China
About the company 24
Major business areas 25
Key focus charts 29
Valuation 30
Key risks 30
Financials 31
JM Financial Institutional Securities Limited Page 3

Exhibit 1. The rally has just begun!

50 Strategy >
entrepreneurship, skill development, consultancy

Formal Strategic Planning, Expansion of Quality Productivity, Stock market Portfolio Restructuring, Challenge-
Product manufacturing, Market development,
Turnover (1x1000 Rs Crore)
Capacity Expansion, control, Integration of listing, manpower ERP/SAP, Performance sustenance;

40 Organization restructuring, Annual Budget with Rationalization, Management, Capacity diversification
Systems, Procedures, R&D Strategic Plan, R&D, New Decentralization, Expansion expansion, Innovation,
infrastructure, Leadership growth Areas, Corporate & empowerment of Board, Manpower augmentation,
development, Management Control Groups, Market Business Excellence M&A
30 Committee Orientation
Inflection
20 S-Curve,
Point
2 yrs decline
Power
10
Tipping Point Industry
0
1957 1971 1980 1990 2000 2012 2021
Global
Environment
India’s economic Cost; Covid-19

Indian economic Kyoto
Oil price shock, Recession in Emergency- suspension of Nuclear meltdown
Nation liberalization Solar < Coal
international power market, democracy, poor tests Protocol
Building macroeconomics, initiation
India’s Nuclear tests Electricity Economic
of economic reforms Sector slowdown
Border Reforms
Conflicts
The increasing peak power deficit and higher incidences of power shortages combined with changing buyer-seller dynamics at
the power exchange have led to a build-up of stress in the demand-supply equation of power. On the back of increasing power
demand and to meet the peak power requirements and address the issue of peak power deficit, we expect a revival of large
capex in coal-fired power plants (25-30GW) which has been muted for a long time. Assuming that BHEL maintains its historical
70-80% market share, and limited competition (only two players, L&T being the other), the trajectory of new order inflows
bodes well for significant improvement in the company’s performance with 70% of revenue contribution from new power
projects.
Entry of BHEL in the scalable opportunities (Vande Bharat Trainsets), emergence of large Pumped-hydro Storage Plants market
where the company commands good market share (EM package), scale-up of defence business, increasing visibility on coal
gasification are likely to help the company’s successful diversification beyond thermal.
Higher debtor days leading to an elongated working capital cycle have been a pain point for BHEL for many years. With the
commissioning of projects (3x800MW NTPC Patratu) which have back-ended payment terms and the start of new projects with
better terms, the burden of high debtors is likely to be relieved in the near future.
Additionally, with changing business mix in favour of EPC contracts, material cost for the company is slated to moderate in the
coming 2-3 years.
With healthy order inflows, subsequent customer advances and execution of orders, we expect the beginning of a decade-long
cycle of good growth driven by operating leverage and deliver Revenue/EBITDA/PAT CAGR of 17%/76%/91% respectively over
FY23-26E.
Source: JM Financial

Investment Rationale
Thermal capex to revive
More than 70% of the company’s business is contributed by new coal-fired power projects.
During FY18-22, the industry saw a drastic decline in ordering (5040/660/2640/0/0 MW in
FY18/19/20/21/22). However, BHEL was able to maintain more than 80% market share, but
the shrinking of opportunities led to overall under-performance. Today, with a visible and
sizeable revival (25GW+) in the ordering of new thermal power projects, the trajectory of
new orders inflows bodes well for significant improvement in performance.
th
The above is broadly in line with National Electricity Plan 2023 (NEP) and the 20 Electric
Power Survey (EPS) of CEA (Central Electricity Authority), where it projected electrical energy
requirement and peak electricity demand on an all-India basis as 1,908BU and 277GW for
the year 2026-27 respectively and 2474 BU and 366 GW for the year 2031-32 respectively.
Exhibit 2. Energy consumption forecast as per NEP

Year CAGR (in %)
Particulars
2021-22 2026-27 2031-32 FY22-27 FY27-32
Total Energy consumption - MU 11,38,408 16,10,053 21,33,380 7.18 5.79
T&D losses - MU 2,43,237 2,97,782 3,40,396
T&D losses (Ex-Bus) - % 17.6 15.61 13.76
Energy Requirement (Ex-Bus) - MU 13,81,646 19,07,835 24,73,776 6.67 5.33
Annual Load Factor - % 77.65 78.57 77.07
Peak Electricity Demand (Ex-Bus) - MW 2,03,115 2,77,201 3,66,393 6.42 5.74

Source: NEP, JM Financial
To meet the above demand, NEP envisages a capacity addition of 54,407 MW during 2023-
32.
Exhibit 3. Capacity additions required (MW)

Addition Under To be
Particulars 2023 2032
required construction ordered
Hydro 46,850 62,178 15,328 18,803 -
Small Hydro 4,944 5,450 506 -
Solar PV 66,780 3,64,566 2,97,786 55,227 2,42,559
Wind 42,633 1,21,895 79,262 8,697 70,565
Biomass 10,248 15,500 5,252 5,252
Nuclear 6,780 19,680 12,900 8,000 4,900
Total non-Fossil 1,78,235 5,89,269
% share 44% 67%
Coal + Lignite 2,05,236 2,59,643 54,407 26,750 27,657
Gas 24,824 24,824 - - -
Total Fossil 2,30,060 2,84,467 54,407 26,750 27,657
56% 33%
Total 4,08,295 8,73,736 54,407 26,750 27,657
PSP 4,746 26,686 21,940 21,940
BESS(MW) 47,244 47,244 47,244
Total Storage 73,930 69,184 69,184

Source: NEP, JM Financial

The Installed capacity of the country as of date is 422,770MW (excluding 589MW of Diesel)
comprising 238,143MW thermal, 7,480MW nuclear and 177,737MW renewable energy
(including large hydro).
 Nuclear projects of 8,000MW are under construction and likely to be commissioned
around FY32. Additionally, nuclear projects totalling 7,000MW are in the pre-project
stage, which we believe are unlikely to be commissioned by 2032. Akin to coal, nuclear
also supports the base load. So, the shortfall in nuclear may raise capacity addition
requirements from coal-fired power plants, in addition to the above.
 Hydro projects of 18,803MW are under construction. During the last decade, India has
seen an annual run rate of a meagre 700-800MW of hydropower generation capacity
additions. We could sense a lot of enthusiasm among NHPC, SJVN and CEA (Hydro
group), as the country is likely to have around 10GW of hydropower capacities in the next
5 years. (Hydropower - Recalling the forgotten giant of clean electricity)
 25,440MW (36 units) of thermal capacity from Central (12,580MW, 18 units) and State
Sector (12,860MW, 18 units) are under construction and all the ‘Units’ are likely to be
commissioned by FY28.
 What we are tracking in 2023?
Exhibit 4. Status of under-construction coal-fired power plants

Particulars MW Overall progress (% completion) Likely trial run
Central Sector
Barh STPP, Stage-I, Unit— 2 & 3 (2x660 MW) 1,320 Unit-2 - 97%/ Unit-3 - 87% Unit-2 - July’23/ Unit -3 - July’24
Telangana TPP, St-I, Unit-1&2(2x800 MW) 1,600 Unit-1 synchronized; load raised up to 515 MW. Unit-1 - Jul’23/ Unit-2 - Aug’23.
North Karanpura TPP, Unit— 2&3 (2x660 MW) 1,320 Unit-2 - 92%/ Unit-3 - 80% Unit-1 - Nov’23/ Unit-2 - Jun’24
Patratu TPP, Unit— 1, 2 & 3 ( 3x800 MW) 2,400 Unit-1 - 65%/ Unit—2 - 60%/ Unit—3 - 44% Unit 1 - Jul’24/ Unit 2 - Dec’24/ Unit 3 - Mar’25
Talcher TPP, St-III, Unit- 1 & 2 ( 2x660 MW) 1,320 Recently started Unit-1 - Nov’26/ Unit-2 - May’27
Buxar TPP, St-I, Unit- 1 & 2 ( 2x660 MW): 1,320 Unit-1 - 80%/ Unit—2 - 65% Unit 1 - Mar’24/ Unit 2 - July’24
Ghatampur TPP, Unit- 1, 2 & 3 ( 3x660 MW): 1,980 Unit-1 - 90%/ Unit-2 - 78% / Unit-3 - 73% Unit 1 - Oct’23/ Unit 2 - Dec’23/ Unit 3 - Apr’24
Khurja STPP,Unit- 1 & 2 ( 2x660 MW): 1,320 Unit-1 - 68%/ Unit-2 - 61% Unit 1 - Feb’24/ Unit 2 - Aug’24
State Sector
N. Chennai STPP, Stage-III, Unit-1 (1x800 MW) 800 Unit 1 – 94% Unit 1 - Oct’23
Ennore SEZ STPP, Unit- 1 & 2 (2x660 MW) 1,320 Unit-1 - 63%/ Unit-2 - 63% Unit 1 - Apr’25/ Unit 2 - Jul’25
Udangudi STPP, Unit- 1&2 (2x660 MW) 1,320 Unit-1 - 68%/ Unit-2 - 65% Unit 1 - Sep'24/ Unit 2 - Jan’25
Jawaharpur STPP, Unit — 1 & 2 (2x660 MW) 1,320 Unit-1 - 91%/ Unit-2 - 86%, Unit-1 – Sep'23/ Unit - 2 - Jan’24
Obra-C TPP, Unit- 1 & 2 (2x660 MW) 1,320 Unit 1 - 90%/ Unit 2 - 75% Unit-1 - Sep’23/ Unit -2 - Apr’24
Panki TPP Ext., Unit- 1 (1x660 MW) 660 Unit-1 - 76% Unit-1 - Mar’23
Dr. Narla Tata Rao TPS, Unit- 8 (1x800 MW) 800 Unit- 8 - 86% Unit 8 - Jul’23
Unit-1 - 79%/ Unit-2 - 79%/ Unit 3 - 72%/ Unit 4 - 75%/ Unit 1 - Dec'23/ Unit - Dec’23/ Unit 3 - Sep’24/ Unit
Yadadri TPP, Unit- 1,2,3,4&5 (5x800 MW) 4,000
Unit-5 - 70% 4 - Aug’24/ Unit 5 - Nov’24
Bhusawal SCTPP, Unit- 1 (1x660 MW) 660 Unit-1 - 87% Oct’23
Sagardighi TPP, St-III, Unit- 1 (1x660 MW): 660 Unit-1 - 49% Sept'24
Source: CEA, JM Financial

 In addition to the above, 25,760MW (Central Sector (15,300MW) & State Sector
(10,460MW)) of additional thermal capacity is planned to be commissioned by 2030 with
near coal sources, i.e., within a distance of 500km.
Exhibit 5. Additional coal-fired power plants likely to come for bidding soon
Project MW Status
Central Sector
th
2x800 MW NTPC Lara STPP-II 1,600 EPC order placed on BHEL on 29 Aug’23
2x800 MW NTPC Singrauli-III 1,600 DPR, TOR, EC done; NIT to issue
1x800 MW NTPC Darlipali-II 800 DPR done/ TOR under approval/ Land partially available
1x800 MW NTPC Sipta-III 800 Land available/ DPR under approval/ TOR to be submitted
3x800 MW NLC Talabira STPS 2,400 Technical bid under evaluation
2x660 MW NLC Cuddalore TPS-II Ext 1,320 Supercritical lignite-fired TPS/ NIT issued in Oct’22
2x660 MW DVC Raghunathpur 1,320 NIT for EPC pckg issued in Apr’23
1x800 MW DVC Durgapur 800 DPR under approval
2x800 MW DVC Koderma 1,600 EC approval awaited/ NIT issued in May’23
3x800 MW NTPC Meja-II 2,400 TOR under approval/ DPR under preparation
1x660 MW SJVNL Buxar Extn. 1,320 DPR under approval
State Sector
2x660 MW Korba, CG 1,320 TOR approved/ DPR approved/ EC under approval
2x660 MW OPGC Extn, Odisha 1,320 TOR, DPR approved/ EIA to submit
1x660 MW Chandrapur, Mah 660 DPR under preparation
1x660 MW Amarkantak, MP 660 DPR approved/ NIT likely soon
1x660 MW Satpura TPP, MP 660 DPR approved/ NIT likely soon
1x800 MW Singareni, Telangana 800 NIT issued in Nov’22/ NIT likely to reissue
2x660 MW Koradi, Mah 1,320 DPR approved/ NIT likely soon
1x800 MW Ukai, Guj 800 DPR approved/ EC accorded/ NIT to issue
2x660 MW Chhabra, Raj 1,320 DPR approved/ Under review
1x800 MW Kalisindh, Raj 800 DPR approved/ Under review
1x800 MW DBCR TPP Ext, Har 800 DPR approved/ Under review
Source: CEA, MOP, Media, JM Financial
Thermal power projects under development for future

 1x800 MW NLC Talabira STPS
 2x800 MW MBPP Sundergarh TPS
 3x660 MW NTPC Nabinagar TPS
 2x800 MW KTPCL Godhna TPS
 2x800 MW UPRVUNL, Obra-D TPS
 2x800 MW UPRVUNL, Anpara-D TPS

Working capital stress is about to ease

Higher debtor days in recent years have led to an elongated working capital cycle burdening
the company with higher interest costs.
Exhibit 6. Trend in Sundry debtors (INR bn) Exhibit 7. Trend in interest cost vis-à-vis debtor days
490 700 6,000 700
420 600 600
5,000
350 500 500
4,000
280 400
400
210 300 3,000
300
140 200 2,000
200
70 100
1,000 100
- -
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
- -
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
Contract Assets (INR bn) Trade receivables (INR bn)
Debtor Days (RHS) Interest cost (INR mn) Debtor Days (RHS)
Source: Company, JM Financial Source: Company, JM Financial
A few power projects under construction, viz., 3x800MW NTPC Patratu have back-ended
payment terms, which has been a source of working capital stress for the company.
However, going forward, we believe that the pain of higher debtors will ease FY25E onwards
with the commissioning of a large number of projects during FY24-26, including 2x660MW
Talcher, which has better payment terms. The easing of working capital stress will in turn
lead to lower interest expenses. With healthy order inflows and subsequent customer
advances, operating leverage will help boost EBITDA margin and earnings going forward.
Exhibit 8. Thermal (coal) capacities under construction where BHEL is the EPC contractor
Capacity Anticipated Progress
Sr. No Project Name Project Cost* (INR bn) LOA Date Unit No
(MW) Trial Run %
Central Sector
U-2 660 Nov-23 93%
1 North Karanpura STPP 162.4 Feb-14
U-3 660 Jun-24 83%
U-1 800 Jul-24 65%
2 Patratu STPP 186.7 Mar-18 U-2 800 Dec-24 62%
U-3 800 May-25 45%
U-1 660 Nov-26 0%
3 Talcher TPP, St-III 118.4 Sep-22
U-2 660 May-27 0%
State Sector
4 DNTR Vijaywada TPS, St-V 90.2 Dec-15 U-1 800 Sep-23 86%
5 Panki TPS Extn. 58.2 Mar-18 U-1 660 Mar-24 78%
U-1 660 Apr-25 64%
6 Ennore SCTPP 98 Sep-14
U-2 660 Jul-25 64%
7 North Chennai TPP, St-III 8.7 Jan-16 U-1 800 Oct-23 93%
U-1 660 Sep’24 69%
8 Udangudi STPP, St-I 130.8 Dec-17
U-2 660 Jan’25 66%
U-1 800 Dec’23 80%
U-2 800 Dec’23 81%
9 Yadadri TPS 299.7 U-3 800 Sep’24 74%
Oct-17
U-4 800 Aug’24 77%
U-5 800 Apr’25 72%
10 Yelahanka CCPP 23.2 Nov-15 GT+ST 370 Sep’23 97%
11 Bhusawal TPS 45.5 Jan-18 U-6 660 Oct’23 88%
12 Sagardighi TPP, Ph-III 45.7 Dec-18 U-1 660 Jan’25 51%
15630
Source: CEA as on Jun’23, JM Financial, *typically EPC is 65-75% of the project cost

Material cost is likely to moderate

The raw material cost as a percentage of revenue has gradually increased from c.61% in
FY14 to c.74% in FY23. This has been a result of multiple factors such as a higher share of
revenue from products-focussed industry business, a sharp rise in RM prices over the last 2-3
years, supply chain constraints (Ministry of Finance in 2020 banned global tenders of up to
INR 200cr in government procurement tenders, which severely affected project execution and
cost economics of PSUs), etc. Going forward, with changing business mix in favour of EPC
orders and high-value-added products/systems, viz., propulsion for semi-high speed trains
and defence supplies, raw material cost is likely to moderate in future.
Exhibit 9. Trend in Raw Material cost

80%
70%
60%
50%
40%
30%
20%
10%
0%
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
RM cost as a % of sales Industry segment as a % of revenue
Source: Company, JM Financial
Productivity of manpower is slated to improve

Currently, BHEL has 29,000+ employees including 8,300 engineers. Due to the challenging
business environment and underperformance of the company in recent years, higher
manpower cost remains a sticky issue for sustained performance. The ratio revenue/employee
has been INR 7.5 mn/employee in FY23 against the desired level of INR 10 mn/employee. We
believe that with increasing volume and yearly superannuation of 500-1,000 employees,
manpower cost as a percentage of revenue will gradually moderate going forward.
Exhibit 10. Employee cost as a % of net revenues Exhibit 11. Net revenue per employee (INR mn/employee)
50,000 35% 9.0
45,000 8.0
30%
40,000
25% 7.0
35,000
30,000 6.0
20%
25,000 5.0
20,000 15%
4.0
15,000 10%
10,000 3.0
5%
5,000 2.0
- 0%
1.0
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
-
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
Employee strength (Nos) Employee cost as a % of t/o

Management rejig
The company will see a complete change in the directors on the board including the
chairman during CY23. Strong desire to turn around hitherto low performance and task-
oriented actions from the internally-grown new CMD (he being head of the company’s
operations) favour a turnaround.
Exhibit 12. Management overhaul

Designation Incumbent Next
KS Murthy selected; An accomplished veteran of BHEL with
Dr. Nalin Shinghal
Chairman & Managing Director rich & diversified experience including at Hyderabad, one of
(Superannuating on 31
(CMD) the largest manufacturing plants; currently heading Corp
Oct'23)
Operations Management at New Delhi
Joined BHEL Board on 12 Aug'22; has rich & diversified

Director (Engineering, R&D) Jai Prakash Srivastava
experience across the company
Joined BHEL Board on 4 Jul'23; an IRPS officer with 25 years

Director (HR) Krishna Kumar Thakur
of experience in HR at Indian Railways
Renuka Gera
Director Bani Varma selected; A marketing veteran from industry
(Superannuated on 31
(Industrial Systems & Products) business; currently heading Electronics Plant, Bengaluru;
Aug'23)
U. S. Matharu Tajinder Gupta selected; A project management veteran from

Director (Power) (Superannuated on 31 NTPC; currently leading execution of NTPC’s 3x660 MW North
Aug'23) Karanpura coal-fired power plant
Vacant;
Govt has still not advertised vacancy. Normally it takes 6-12
Director (Finance), CFO Addl charge given to
months for appointing the new executive.
Director (E,R&D)
Source: DoPT, Govt. of India, JM Financial
Large and diversified orders’ inflow is increasing

BHEL in recent years has won a good set of orders, reinforcing its leadership in the Indian
power sector. Some of these orders like 700 MWe Nuclear steam turbines and supply of
SRGMs are likely to have a very good margin profile due to their technology depth. Given the
momentum in nuclear capacity additions, indigenisation of defence supplies and
modernisation of rail transport, we believe that BHEL is well placed to capitalise on upcoming
opportunities.
Exhibit 13. Key order inflows

Quarter Customer Description Approx. value (INR mn)
2QFY24 NTPC Ltd 2x800 MW NTPC Lara TPS 110000
2QFY24 NHPC Ltd EM pckg for 12x240MW Dibang HEP 22,500
2QFY24 Adani Power Limited BTG & supervision of E&C for 2x800 MW Mahan 40,000
2QFY23 NTPC Ltd 2x660 MW EPC Talcher TPP 8500
4QFY23 Ministry of Defence Supply of SRGMs (main gun on Indian warships) 37,000
Supply and 35 years’ maintenance of 80 nos. of
1QFY24 Ministry of Railways 2,30,000
Vande Bharat Trainsets order to BHEL- TRSL consortium
2QFY22 NPCIL 6x700 Mwe EPC, Nuclear steam turbines 1,08,000

Beyond Thermal
The energy transition is real, irreversible and gaining momentum. Amidst this, the demand
for power in India is on a sustained growth path with the generation mix balancing between
sustainability and security. The utilities in India are successfully executing their transition
strategy while harnessing renewable growth opportunities.
Hence, opportunities in thermal power are getting limited, with negligible terminal visibility.
So, ‘what is beyond thermal?’ has been an unanswered question for the company for a long.
The revenue from non-power industry business has largely remained stagnant for years. The
company’s entry into semi-high-speed trains and likely success in some of the major defence
contracts in coming quarters will help it diversify the revenue pool and mitigate risk.
Exhibit 14. Industry segment

90 35%
80
30%
70
25%
60
50 20%
40 15%
30
10%
20
5%
10
- 0%
Revenue from Industry segment (INR bn) % share in total revenue
 Entry into urban transport: After years of efforts, the company has finally succeeded in
entering the growing urban transport sector (MEMU, EMU & high speed/ semi-high speed
trainsets).
Further to winning the order of four propulsion systems for Vande Bharat Trainsets, BHEL
in consortium with Titagarh Rail Systems Ltd. (TRSL) has successfully secured an order
valued at INR c.230bn from Indian Railways for 80 Vande Bharat Sleeper Trainsets. The
scope of the order covers engineering, manufacturing, testing, commissioning, and
supply of the trainsets including the maintenance for 35 years.
 Increasing footprint in defence: For years, the company has been attempting to increase
its footprint in the growing Indian defence equipment/ systems business, leveraging its
unique capabilities, viz., precision manufacturing, heavy forging, special purpose welding
and advanced CNC machining activities.
The company booked the highest orders in defence in FY23. This includes orders for
upgraded SRGM, heat exchangers for fighter aircraft and a maiden order for 30 Ah Li-ion
batteries for AMCA (Advanced Medium Combat Aircraft), making it the sole Indian
supplier of Li-ion batteries for next-generation aircraft, amongst others.
 Nuclear, Small Module Reactors (SMR): India is working on new technologies such
as small modular reactors, which can be factory-built and help in clean energy transition.
SMR, with up to 300MW capacity, is flexible in design and requires a smaller footprint.
Being a mobile and flexible technology, SMR can be factory-built, unlike the conventional
nuclear reactors that are built onsite. NTPC is continuously engaging with BARC to finalise
the design as part of its SMR development efforts, which will open up a new stream of
opportunities for the company.

 Coal gasification: The need for the country to utilise its vast coal reserves (in the absence
of any substantial gas/ oil reserves) has been recognised at various levels. BHEL has been
the pioneer in coal gasification technology in the country since 1990s. The National Coal
Gasification Mission (NCGM) envisages phase-wise implementation for 100 MT of coal
gasification by 2030. BHEL has leveraged its indigenously developed coal gasification
technology (the world’s first proven technology for gasification of high ash Indian coals)
and completed the design and engineering of the gasifier for a 2,000TPD commercial-
scale plant. The company is in the process of setting up a JV with Coal India Ltd for
setting up a coal-to-ammonium nitrate plant which will open up a major business area for
BHEL.
 Pumped hydro storage: With increasing certainty and visibility over the accelerated pace
of transition to renewables in India, Pumped-hydro Storage Plants (PSPs) have taken
centre stage within a short span of 6-8 months among a multitude of energy storage
technologies. Currently, India has an installed PSP capacity of 4,746MW. Projects with a
capacity of 27,090MW are at various stages of construction. Out of these, 5,480MW of
projects are expected to get commissioned by 2027 and the balance by 2032. So, the
installed capacity of PSPs in India is likely to reach 10,226MW by 2027 and 31,836MW by
2032, making it an INR 72bn growth opportunity. BHEL is a market leader in the
Electromechanical (EM) package for hydropower generation plants which constitutes 20-
25% of the PSP opportunity. Hence, with technology gradation and competitive
positioning, we believe, this can be a large opportunity for the company in next 3-4 years
as discussed in our report ‘Pumped hydro - Quantifying the business opportunities’.

How we got here?

 India had 175,374MW of conventional power generation capacity in 2012. Subsequent
to Electricity Act 2003, the industry saw huge participation from the private sector and
the generation capacity reached 289,611MW in FY22 (almost 50% added during 10
years).
Exhibit 15. Generation capacity mix, 2012 Exhibit 16. Generation capacity mix, 2020
27% 26%
43%
49%
25%
30%
State Central Private State Central Private
Source: CMIE, JM Financial Source: CMIE, JM Financial
 This was in accordance with the capacity addition target of 1,34,520 MW set by CEA for
th
12 Five Year Plan period (2012-17), which in turn was derived from 9% GDP growth
th
assumed in the Approach Paper (Aug 2011) for the 12 FYP by Planning Commission.
Exhibit 17. Installed generation capacity 2005-17, (MW) Exhibit 18. Thermal capacity addition over 2005-17, (MW)
350,000 25,000
300,000
20,000
250,000
200,000 15,000
150,000
10,000
100,000
50,000 5,000
-
FY05 FY07 FY09 FY11 FY13 FY15 FY17 -
FY05 FY07 FY09 FY11 FY13 FY15 FY17
Thermal Nuclear Hydro Renewables

 However, due to global financial crisis and domestic challenges, India’s economic growth
suffered resulting in subdued demand for power during the ensuing years.
Exhibit 19. Trend in GDP growth rate vis-à-vis growth in power demand
12.0
10.0
8.0
6.0
4.0
2.0
-
-2.0
-4.0
-6.0
-8.0
FY99 FY01 FY03 FY05 FY07 FY09 FY11 FY13 FY15 FY17 FY19 FY21 FY23
GDP Growth rate (%) Growth in power demand (%)
Source: CMIE, JM Financial
As a result, the newly installed capacities remained underutilized for a long time and gave an
impression of a ‘power surplus’.
Exhibit 20. Energy deficit trend (%) Exhibit 21. Peak demand deficit trend (%)
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
- -
-2.0 -2.0
-4.0
-4.0
-6.0
-6.0
-8.0
-8.0
-10.0
-10.0 -12.0
-12.0 -14.0

 Coal plant PLFs have also declined from a peak of 75-80% to an average of c.60% in
recent years.
Exhibit 22. Coal plant PLF trend (%)

90
80
70
60
50
40
30
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Subsequently, the addition of new coal-fired capacities was sharply curtailed and
policymakers prudently used the opportunity to add renewables in the generation capacity
mix.
Exhibit 23. Annual power generation capacity addition trend (MW)

25,000
20,000
15,000
10,000
5,000
-
FY14 FY15 FY16 FY17 FY18 FY19* FY20 FY21 FY22 FY23
-5,000
Coal-fired Renewables
Source: CMIE, JM Financial, *coal capacities retired during the year

Gradually, excess generation capacity is absorbed in the system. Utilisation (PLF) of thermal
power plants is increasing.
Exhibit 24. Coal-fired power plant monthly PLF trend (%)

80
70
60
50
40
30
20
Jan-21
Jan-22
Jan-23
Apr-20
Apr-21
Apr-22
Apr-23
Oct-20
Oct-21
Oct-22
Jul-20
Jul-21
Jul-22
Jul-23
With India poised for significant economic growth, increasing frequency of seasonally
extreme temperatures and intensifying weather extremes (as elaborated in the subsequent
discussion), the country is on the cusp of another cycle of thermal capacity additions to
ensure reliability of supplies and safeguard economic growth.

Connecting the dots

Going forward, connecting the dots between recent events to see the emerging picture, we
are sensing a challenge in meeting the power demand both during peak hours as well as at
the energy level. Notwithstanding very good growth in renewables in future, we believe India
is on the cusp of adding more coal-fired power plants given the unresolved technical
challenges (intermittency) around renewable power and lack of sufficient variable power.
Dot#1: Demand pattern is shifting

In recent years, it has been observed that peak electricity demand is shifting to the early
afternoon than in the evening, which increasingly coincides with the availability of grid-
th
connected solar power. For instance, peak demand reached of 239GW at 1250 hrs on 17
Aug’23 where thermal/hydro/gas/nuclear/renewable contributed 140/29/5.6/5.8/54 GW to
the supply. But, with the increasing frequency of extreme weather events, the reliability of
non-coal power is debatable.
Exhibit 25. Supply pattern for 17th Aug'23

250000
200000
150000
100000
50000
0
00:00
00:45
01:30
02:15
03:00
03:45
04:30
05:15
06:00
06:45
07:30
08:15
09:00
09:45
10:30
11:15
12:00
12:45
13:30
14:15
15:00
15:45
16:30
17:15
18:00
19:00
19:45
20:30
21:15
22:00
22:45
23:30
thermal hydro gas nuclear renewable
Source: Elekore, JM Financial

Dot#2: Annual System Load Factor is declining

The Annual System Load Factor (ratio of average load to peak load during the year) depends
on the pattern of utilisation of different categories of load. In India, the load factor has
remained ~82-86% during 2011-18, primarily because of prevailing energy shortages in the
system and load-staggering measures adopted in various states, particularly in the agriculture
sector. However, it has declined gradually from 85.5% in 2017-18 to 71.4 % in 2021-22
predominantly due to higher growth in peak load as compared to the increase in energy
terms. Additionally, all India load diversity has been increasing over the years due to several
factors like increasing RE penetration, agriculture load shifting, rural electrification etc.
This is amidst the circumstances when the share of RE in the generation mix has continued to
increase, from 5.6% in FY16 to 13.8% in YTDFY24. However, conventional power
generation capacity has largely remained stagnant in recent years. It is just enough to ensure
generation for non-peak demand. However, in future the electricity generation system can no
longer rely on such sufficient levels of depreciated capacity, new conventional capacities
(which today are facing low load factors) will be required to cover net-demand peaks when
RE is generating little or nothing.
Any surge in industrial activity and subsequent shifting of the peak load to evening hours
may lead to shortages of power for industrial consumers in future.
Exhibit 26. System load factor (%)

90.0
85.0
80.0
75.0
70.0
65.0
60.0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Source: NEP, EPS, JM Financial

Dot#3: Extreme weather events creating supply uncertainty

Himachal Pradesh has 10.3GW of hydropower generation capacity as of Jul’23. During
1QFY24, it witnessed erratic weather conditions leading to floods and all-round damage.
Hydropower generation from NHPC declined 3% YoY from 8,010MU (1QFY23) to 7,787MU
(1QFY24). The PAF of the plants also declined from 98.6% LY to 94.1% in 1QFY24 due to
insufficient availability of water in Kishanganga, Loktak and Dholinga power stations.
Similarly, the generation from hydropower plants of SJVN also declined to 2,106MU in
1QFY24 from 2,736MU in 1QFY23 due to 25% reduction in the discharge of water.
As the generation mix is shifting towards renewables particularly in favour of solar, bringing
diversity into the supply mix by enhancing the share of wind is imperative. This will help in
partly addressing grid challenges along with cost advantages and support to domestic
manufacturing. However, generation from wind still remains uncertain and is susceptible to
extreme weather events. We have discussed the wind sector in detail in our report on ‘Suzlon
Energy - Wind blows again as the sun shines’.
The CUF of wind power plants of Torrent Power, Gujarat, declined from 33.4% in 1QFY23 to
30.5% in 1QFY24 due to the Biparjoy cyclone.
We have also highlighted the impact of extreme weather conditions in our report – ‘What
happens if there is El Niño?’
Dot#4: Deficit (peak power & energy) increasing, slowly & steadily
Both peak power and energy deficit have been slowly and steadily increasing in recent years.
Exhibit 27. Peak demand deficit (annual) Exhibit 28. Peak demand deficit (monthly)
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
May-23
Aug-22
Mar-23
Nov-22
Dec-22
Sep-22
Apr-23
Oct-22
Feb-23
Jun-23
Jan-23
Jul-23
- -
-1,000 -0.5 0 0
-200 -0.1
-2,000 -1.0
-400 -0.2
-3,000 -1.5
-600 -0.3
-4,000 -2.0
-800 -0.4
-5,000 -2.5
-1000 -0.5
-6,000 -3.0 -1200 -0.6
-7,000 -3.5 -1400 -0.7
-8,000 -4.0 -1600 -0.8
-9,000 -4.5 -1800 -0.9
-10,000 -5.0 -2000 -1
Peak Deficit (MW) Peak Deficit (%) Peak deficit (MW) Peak deficit (%)

Dot#5: Increasing incidences of power outages

After a gap of many years, power supply shortages have been reported in Bihar, Rajasthan,
Karnataka, and Uttar Pradesh in the media.
 During Jul’23, at least one person was killed and two others were injured after the police
allegedly opened fire to disperse a mob who were protesting in Bihar's Katihar against
the irregular supply of electricity and higher power tariffs.
 In the wake of the increasing power crisis in Rajasthan, the state government decided to
cut the power supply to industries and give it to farmers and the common people. Power
cuts are being made due to high demand and low supply to keep pace with demand and
supply.
 With a shortage of around 2000 MW of power during the peak hours, Uttar Pradesh is
reeling under a power crisis during the present humid and scanty rains in the monsoon.
Exhibit 29. Media report on power shortages in Bihar Exhibit 30. Media report on power shortages in Rajasthan
Source: Media, JM Financial Source: Media, JM Financial
Exhibit 31. Media report on power shortages in UP Exhibit 32. Media report on power shortages in Delhi
Source: Media, JM Financial Source: Media,, JM Financial

Dot#6: Unprecedented action by CERC

India’s power grid is experiencing high demand due to increasing power demand, growing
RE penetration and increasing intermittency due to renewables which is throwing up newer
challenges for grid management.
th
Peak power demand on 11 Aug’23 was 229GW, a YoY of increase 31.44%. As per Grid
India, load shedding of the order of 6-7GW was reported by the states despite the availability
of 3GW of reserve shutdown.
Due to the criticality of the circumstances, CERC in an unprecedented move issued an order
th
on 15 Aug (India’s Independence Day- a National Holiday) to mandate harmonisation
between the conflicting provisions governing the manner of power-drawal and injection
schedules which are communicated between Discoms, SLDC, RLDC and Generators.
Exhibit 33. Suo moto office order from CERC (pg-1) Exhibit 34. Suo moto office order from CERC (pg-4)
Source: CERC, JM Financial Source: CERC, JM Financial

Dot#7: Buyer-seller relationship at power exchange is changing

The Indian Energy Exchange, the country's most liquid electricity trading platform, is gradually
shifting in favour of sellers with demand increasing faster than supply. The exchange is
experiencing heavy demand for power with limited supply to the extent that the buy/sell ratio
rd
hovered around 10 during the week ending 3 Sept’23.
Exhibit 35. IEX volumes (MWh)

75,000
70,000
65,000
60,000
55,000
50,000
1 Jan'21 to 30 Aug'21 1 Jan'22 to 30 Aug'22 1 Jan'23 to 30 Aug'23
Demand at IEX (MWh) Supply at IEX (MWh)
Source: IEX, Elekore, JM Financial
The ratio becomes more skewed during high-consumption periods like extreme summer,
harsh winter and sultry monsoon.
Exhibit 36. Daily demand/supply on IEX (MWh)

4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
Source: IEX, Elekore, JM Financial
Dot#8: Repeated imposition of Section-11

The Ministry of Power has been repeatedly imposing Section-11 of the Electricity Act, 2003
(12 Jun’22 to 31 Oct’22 extended to 31 Dec’22; 16 Mar’23 to 15 Jun’23 extended first to
Sept’23, further extended to Oct’23) asking imported coal-based power generating
companies to mandatorily operate given the “extraordinary circumstances”. For the purposes
of this section, the expression “extraordinary circumstances” means circumstances related to
threat to the security of the state, public order or natural calamity or such other
circumstances arising in the public interest [also refers to the times when electricity demand
far surpasses supply].

Dot#9: Retirement of old thermal power plants is delayed

Central Electricity Authority in January 2023 suggested utilities not to retire or re-purpose old
coal-based power stations before 2030, considering the expected energy demand scenario
and availability of capacity in future.
Earlier in the National Electricity Plan 2018, CEA identified 22,690 MW of coal-fired capacities
for retirement due to old age, inefficiencies and emissions. Out of which, capacity totalling to
10,044 MW has been retired. We believe that once current challenges are over, the
replacement of old plants may regain traction and open up new opportunities for the power
sector value chain.
Dot#10: JSW Energy is not signing PPA

JSW Energy Ltd in 2022 acquired 2X350MW Utkal thermal power plant from Ind-Barath
Energy (Utkal) Limited through NCLT. Unit-I was commissioned in 2016 but was non-
operational due to financial stress. Unit-II had incomplete construction. Currently, the
restoration of Unit-1 has been completed. Unit-1 is expected to be commissioned by Oct’23
and Unit-2 by the end of FY24. The management during various interactions with investors
and analysts has been expressing unwillingness to sign long-term PPA for the capacities.
However, the company wants to keep capacities open for merchant power trade in future,
obliquely indicating ensuing power shortages and higher merchant power prices.
Dot#11: Tit-bits
 Dec’22: Electricity Amendment Rules, 2022 amended mandating preparation of resource
adequacy plan to successfully meet the power demand of the consumers.
 Jan’23: MoP directed utilities to import coal for blending at the rate of 6% by weight
through a transparent competitive procurement to have sufficient stock at their power
plants for smooth operations till September 2023.
 Jan’23: The power ministry asked utilities not to retire coal-fired power plants till 2030
(earlier committed to phasing down of old plants)
 Mar’23: The power ministry instructed the generators not to take any planned
maintenance during the high demand period (say April to May 2023)
 Mar’23: MoP approved mechanism for operationalization of around 5,000MW gas based
power plants for 18 days during crunch period (Apr-May 2023).
 May’23: The power ministry instructed all generators for timely import of coal for
blending purposes so that adequate coal stock is maintained in the plant.
 Aug’23: CEA reported 28 incidents where grid frequency deviated outside the prescribed
limits, involving the loss of over 1,000MW of renewable energy since January 2022
adding worries about more frequent power outages.
Dot#12: ‘Powerful’ & ubiquitous similarities with China

Most of North China sweltered under exceptionally high temperatures during June-July’23
leading to an early summer peak for power demand and surge in demand for cooling. Peak
th
load exceeded 281GW on 24 Jun’23, up by 2.9% YoY. Meanwhile, drought and low rainfall
in recent months brought a significant decline in hydroelectricity output. China went full
steam ensuring fuel supply for thermal power plants. During Jan-Jun’23, it produced 2.3
billion tonnes of raw coal, up by 4.4% YoY, while coal imports were up by 93%, at 220MT.
With hydropower output contracting and power generation from renewables being
insufficiently stable, thermal power (particularly coal) became China’s ultimate guarantor of
power supply in recent months.

About the company

BHEL is India’s largest engineering and manufacturing enterprise, operating in the energy,
industry and infrastructure sectors. The company was established in 1964 and since then it
has been offering comprehensive products, systems, and services in various areas including
power generation (thermal, hydro, gas, nuclear, and solar PV), transmission, transportation,
defence, aerospace, oil and gas, and emerging sectors like battery energy storage systems.
BHEL has been instrumental in developing the country's power generation capacity,
contributing to core industrial and strategic sectors. The company has been consistently
investing more than 2.5% of its revenue in R&D and innovation, establishment of world-class
manufacturing facilities and offering sustainable business solutions. It has 16 manufacturing
facilities and two repair units.
Exhibit 37. BHEL geographical presence

Major business areas

Power generation
The power generation business comprises nuclear, hydro, thermal, gas and renewable power
plant businesses. The company has proven turnkey capabilities for executing power projects
from concept to commissioning. The company manufactures a wide range of products for
nuclear power plants, viz., steam generators, reactor headers and end shields, besides nuclear
turbine-generator sets ranging from 220MWe to 700MWe. Customised hydro sets of Francis,
Pelton and Kaplan types for different head-discharge combinations are also engineered and
manufactured by BHEL. The company manufactures advanced-class large-size gas turbines
and matching generators. Additionally, the company supplies co-generation and combined
cycle plants with higher plant efficiencies. The company also offers state-of-the-art emission
control equipment for thermal-based plants for lower carbon footprints and compliance with
the standard emission norms. BHEL has proven expertise in plant performance improvement
for BHEL and non-BHEL sets through renovation, modernization and uprating of a variety of
power plant equipment including solutions towards flexible operations.
Power transmission systems and products
BHEL is also a leader in the field of power transmission in India with a wide range of
transmission systems and products and having a proven track record across the globe. It
undertakes turnkey transmission projects from concept to commissioning on EPC basis, which
includes execution of EHV & UHV substations/ switchyards, both AIS and GIS types ranging
from 33 kV to 765 kV, HVDC converter stations (up to ±800 kV), and reactive power
compensation schemes. BHEL has executed a number of high voltage direct current (HVDC)
projects in India, notably the world’s first multi-terminal ±800kV, 6000MW UHVDC
Transmission link between north-eastern India and Agra (Uttar Pradesh). It is the first
transformer manufacturer in India, having successfully short-circuit tested up to 500MVA,
400kV auto transformers. BHEL has indigenously developed and commissioned India’s first
400 kV phase shifting transformer (PST).
Rail Transportation
BHEL is a leading designer and manufacturer of Rail Transportation systems like semi-high-
speed trains, Electric Locomotives, Diesel Electric Shunting Locomotives and Electrical Multiple
Units. It also manufactures critical equipment like Traction Converters/ Inverters, Motors,
Transformers, Bogies, and Train Control Management System (TCMS).
It has supplied 800+ locomotives for Railways and Industrial operations. It has manufacturing
capability of electric locomotives upto 9,000HP and diesel-electric shunting locomotives upto
3,250HP. India’s first fleet of fully air-conditioned AC EMU trains for the Mumbai sub-urban
region equipped are with BHEL’s electric and control systems.
Industrial systems and products

BHEL supplies major equipment for a number of industries including Oil and Gas, Metallurgy
and Mining, Petrochemicals, Chemicals, Automobiles, Steel, Aluminium, Cement, Fertiliser,
Sugar, Paper, Textiles, etc. Its vast range of products offered includes AC machines,
alternators, centrifugal compressors, Oil Rigs, X-Mas Tree Valves, Transformers, Substations,
Switchgear, Heat exchangers, pressure vessels, columns, fired heaters, locomotives,
Downstream Oil and Gas packages (Sulphur Recovery Unit), Gas turbine based co-generation
and combined cycle power plants, steam turbine-based captive power plants to suit the
requirement of different industries, turbo-generators, complete range of steam generators
(Circulating Fluidized Bed Combustion, Pulverised Fuel, Utility Boiler & heat recovery steam
generator) for process industries capable of burning a wide variety of fuels, Electrostatic
Precipitators and Fabric Filters.
Defence and Aerospace

BHEL has been manufacturing and supplying equipment and services to Indian defence forces
for almost 3 decades. Its major products include super rapid gun mount (upgraded), strategic
naval equipment, integrated platform management systems, thermos-pressed components,
electrical machines, turret castings for T72 tanks, simulators, castings and forgings, etc. BHEL
is also designing and manufacturing heat exchangers for military aircraft and is supplying
heat exchangers for India’s Light Combat Aircraft (LCA) ‘Tejas’. Indian Space Research
Organisation (ISRO) has partnered with BHEL for the manufacturing of space-grade solar
panels and satellite batteries.
Oil and Gas

BHEL supplies complete onshore drilling rigs capable of drilling up to 9,000 metres, with
ACSCR systems or AC drives incorporating the latest state-of-the-art technology, and also
mobile rigs, and work-over rigs. The company also supplies onshore drilling rig equipment
like draw works, rotary-table, travelling block, swivel, mast and substructure, mud systems,
Artificial lift systems (surface units of Sucker Rod Pumps) and rig electrics to leading oil and
natural gas exploration companies in India. Wellheads and X-Mas tree valves up to 15000 Psi
rating and Choke & Kill Manifold upto 10,000 Psi rating for onshore as well as offshore
applications are also provided by BHEL to drilling companies. The company has also supplied
casing support systems, mudline suspension systems and block valves for offshore
applications.
Renewables and Battery storage solutions

BHEL also manufactures almost all the major equipment of solar power plants, viz., Solar
Cells, Solar Modules, PCUs, HT Panels, SCADA, Power Transformers etc., with complete grid
storage solutions. BHEL has a dedicated industrial R&D centre for developing high-efficiency
silicon solar cells and process optimisations. It has emerged as the market leader in the
floating solar EPC segment in India by commissioning some of the country’s largest floating
solar power plants, viz., NTPC Ramagundam 100MW (Telangana), NTPC Simhadri 25MW
(Andhra Pradesh), NTPC Kayamkulam 22MW (Kerala) etc.
The company also offers battery energy storage solutions. BHEL commissioned a 1MWh
battery energy storage system (BESS) with in-house developed PCS (power conditioning
system) and EMS (energy management system) featuring three different types of battery
chemistries-lithium ion battery, flow battery and advanced lead acid battery. It has a state-of-
the-art facility for packaging and testing of Li-ion batteries for space applications. The
company has assembled, tested and supplied batteries of 40 Ah - 180 Ah to ISRO for use in
its satellites for more than 2 decades.

Exhibit 38. Business areas

Avg annual order
No Business Major offerings Experience Key driver
inflows*, (INR bn)
190+ GW power generating

Thermal sets: up to 800 MW ratings capacity installed
Power sector
Emission control equipment: ESP, FGD, SCR 1000+ generating units High volatility in
1 (Thermal Utility thermal capex
Gas turbines & generators: upto 297 MW rating commissioned recent years
Power plant)
18,000+ MW Captive Power Plants
commissioned
Power Sector Hydro EM Package: up to 400 MW 45% market share; 30GW installed Govt. hydropower
2 20-30
(Hydropower) capacity capex
Power Sector 41 steam generator; 96 reactor

3 Nuclear SG & TG sets: upto 700 MWe Govt. policy
(Nuclear) header – supplied for primary side
Power sector Spares for BHEL and non-BHEL sets

4 N.A. 20-30 Stable
(Spares & services) Remote Monitoring & Diagnostic Systems (RMDS)
Semi high speed (Vande Bharat) trainsets,electric

430+ Electric Locos supplied to
locomotives upto 9000 HP, diesel electric locos upto 3000
Indian Railways
HP, EMU coaches, IGBT based propulsion equipment Railways & urban
5 Transportation 20-30
(traction converter/auxiliary converter/ vehicle control rail capex
340+ Diesel Locos supplied to
unit), traction transformers for electric Locos & ACEMUs/
various industries
MEMUs
EHV substations (AIS and GIS types) ranging upto 765 kV,
UHV substations and HVDC converter stations up to ±800
Transmission kV, power transformers, shunt reactors, vacuum 6,40,000+ MVA transmission
6 20-30 T&D growth
systems & products switchgear, gas insulated switchgears, Flexible AC equipment supplied
Transmission system devices, composite insulators for
upto 765 kV application etc.
Standalone STGs, BTG package, Refinery CPP on EPC

Core industries’
7 Captive power basis, AFBC and CFBC boilers, UB package, Downstream 230 Gas Turbines operating in India 10-20
capex
Oil & Gas packages on EPC basis BHEL's
Super Rapid Gun Mount (SRGM), Integrated Platform

Management System for naval ships, compact heat
exchangers, space grade Lithium ion cells/ solar panels/
40+ Naval Guns supplied to Indian
8 Defence & Aerospace batteries etc. Hot forming of spacecraft propellant tank, 10-15 Govt. policy
Navy
forming of Titanium Shell/ Domes, welding & machining
of Titanium sheet and tubes, rotary main motor
generators
32,000+ AC machines- supplied,

largest Indian manufacturer
Oil Rigs , Well Head & X-mas Tree Valves, Fabricated
400+ Compressors & 90 Oil drilling Core industries’
9 Industrials Equipment, Boiler Feed Pumps, Compressors, Motors, 10-15
Rigs Supplied capex
Valves, etc.
12,000+ Well Heads & Christmas
Tree valves supplied
EPC for Solar PV Plants; Solar Cells, Solar Modules, PCUs,

10 Renewable 1.2 GW total solar portfolio <10 Energy transition
HT Panels, SCADA, Power Transformers
Source: Company, JM Financial, *excluding one-off large wins/losses; estimates based on company’s order book declarations

Research & Development (R&D)

BHEL has established a well-equipped state-of-the-art R&D infrastructure, comprising 14
Centres of Excellence at various locations, including Corporate R&D Hyderabad (Intelligent
Machines and Robotics, Machine Dynamics, UHV Laboratory, Computational Fluid Dynamics,
Permanent Magnet Machines, etc.), HPBP Tiruchirappalli (Coal Research Centre) and EDN
Bengaluru (Power Electronics, IGBT & Controller Technology) etc. The company also has five
Specialised Research Institutes, namely Pollution Control & Research Institute (PCRI),
Haridwar, Welding Research Institute (WRI), Trichy, Ceramic Technological Institute (CTI),
Bengaluru, Centre for Electric Transportation (CET), Bhopal and Amorphous Silicon Solar Cell
Plant (ASSCP), Gurugram.
BHEL has established itself as a leading R&D and Innovation organisation in the heavy
engineering sector in the country. In FY23, a significant 19% of the company’s revenue was
generated from products, systems, and services developed in-house, and it has filed 5,443
st
IPRs till 31 Mar’23.
With R&D expenditure consistently surpassing 2.5% of revenue in recent years, BHEL ranks
among the top spenders on R&D in the engineering and manufacturing industry.
Some of the recent developments include:
 Developing India's first coal-fired AUSC coal-fired power plant technology with IGCAR &
NTPC
 Li-ion cells & PV modules for space applications with ISRO
 Development of high-efficiency mono-PERC cells – 21% efficiency achieved
 3-phase propulsion electrics for 9000 HP WAG9HH electric locomotives for Indian
Railways
 Participant in all stages of development of the Indian nuclear power programme of

BARC/NPCIL (Stage I: PHWR; Stage II: FBR; Stage III: AHWR)
 Coal to Methanol (for greener use of Indian coal)
 In-house 1 MWh Battery Energy Storage System
Exhibit 39. R&D expenditure as a % of net revenue

12.0 5.0%
4.5%
10.0
4.0%
3.5%
8.0
3.0%
6.0 2.5%
2.0%
4.0
1.5%
1.0%
2.0
0.5%
- 0.0%
R&D expenditure (INR mn) as a % of revenue

Key focus charts

Exhibit 40. Order-book and order inflow trend (INR bn) Exhibit 41. Order-book segment-wise breakup (INR bn)
1,400 500
450
1,200
400
1,000 350
800 300
250
600 200
400 150
100
200
50
- -
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
Order inflows (INR bn) Order backlog (INR bn) Power Industry Exports
Exhibit 42. Revenue trend (INR bn) Exhibit 43. Raw material cost as a % of net revenue
450 90%
400
350 80%
300
70%
250
200 60%
150
100 50%
50
- 40%
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
30%
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
Power (INR bn) Industry (INR bn)
Exhibit 44. EBITDA and EBITDA margin trend Exhibit 45. Sundry debtors trend (INR bn)
50 15% 490 700
40 420 600
10%
30 350 500
5%
20
280 400
10 0%
210 300
- -5%
140 200
-10
-10% 70 100
-20
-15% - -
-30
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
-40 -20%
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
Contract Assets (INR bn) Trade receivables (INR bn)

EBITDA (INR bn) EBITDA Margin (%) Debtor Days (RHS)

Valuation
With rising traction in thermal capex revival and fructification of diversification initiatives by
the company, we expect BHEL to report an average annual order intake of INR c.460bn
during FY24-26E, >1.5x against the long-term average of INR c.275bn booked during FY14-
23. Earnings could grow significantly over the next 3 years, given strong operating leverage
and better execution. We expect the company to deliver Revenue/EBITDA/PAT 3-year CAGR
of 17%/76%/91% respectively over FY23-26E. We initiate coverage on the stock with a BUY
rating and a target price of INR 165, (based on a 23x Sept’25E EPS).
Key Risks
 Upcoming elections in India may bring uncertainty around ordering of large infrastructure
(power) orders
 Ageing of current employees and non-recruitment of fresh engineers in recent years can
pose execution challenges
 Delay in liquidation of receivables may continue to exert stress on working capital
 Delays in execution of projects may activate dormant players

Financial Tables (Consolidated)

Income Statement (INR mn) Balance Sheet (INR mn)
Y/E March FY22A FY23A FY24E FY25E FY26E Y/E March FY22A FY23A FY24E FY25E FY26E
Net Sales 2,01,533 2,21,363 2,67,813 3,24,195 3,60,635 Shareholders’ Fund 2,65,066 2,68,280 2,71,132 2,82,680 3,06,682
Sales Growth 23.7% 9.8% 21.0% 21.1% 11.2% Share Capital 6,964 6,964 6,964 6,964 6,964
Other Operating Income 10,577 12,286 12,901 14,191 15,610 Reserves & Surplus 2,58,102 2,61,316 2,64,168 2,75,716 2,99,718
Total Revenue 2,12,110 2,33,649 2,80,714 3,38,386 3,76,244 Preference Share Capital 0 0 0 0 0
Cost of Goods Sold/Op. Exp 1,47,938 1,63,007 1,94,165 2,30,178 2,41,625 Minority Interest 0 0 0 0 0
Personnel Cost 55,168 57,006 59,287 61,658 64,124 Total Loans 47,450 53,850 50,260 45,234 35,234
Other Expenses 0 0 0 0 0 Def. Tax Liab. / Assets (-) -35,301 -34,226 -34,226 -34,226 -34,226
EBITDA 7,377 7,166 5,807 19,967 40,289 Total - Equity & Liab. 2,77,215 2,87,904 2,87,166 2,93,688 3,07,690
EBITDA Margin 3.5% 3.1% 2.1% 5.9% 10.7% Net Fixed Assets 27,587 27,533 27,998 28,648 29,500
EBITDA Growth 0.0% -2.9% -19.0% 243.8% 101.8% Gross Fixed Assets 63,309 66,210 69,401 72,911 76,772
Depn. & Amort. 3,141 2,603 2,726 2,861 3,009 Intangible Assets 87 93 93 93 93
EBIT 4,237 4,562 3,081 17,106 37,280 Less: Depn. & Amort. 39,946 42,122 44,848 47,709 50,717
Other Income 3,678 5,447 5,991 6,590 7,249 Capital WIP 4,223 3,446 3,446 3,446 3,446
Finance Cost 3,547 5,214 4,164 3,820 3,219 Investments 0 0 0 0 0
PBT before Excep. & Forex 4,368 4,794 4,908 19,877 41,311 Current Assets 4,99,464 5,31,846 5,69,552 6,15,386 6,37,927
Excep. & Forex Inc./Loss(-) 0 0 0 0 0 Inventories 65,602 67,559 74,107 88,821 98,804
PBT 4,368 4,794 4,908 19,877 41,311 Sundry Debtors 3,31,686 3,62,839 3,44,855 3,46,400 3,35,934
Taxes -267 21 834 3,379 7,023 Cash & Bank Balances 71,537 66,426 62,344 36,281 36,689
Extraordinary Inc./Loss(-) 0 0 0 0 0 Loans & Advances 2,983 3,622 4,402 5,329 5,928
Assoc. Profit/Min. Int.(-) 0 0 0 0 0 Other Current Assets 27,656 31,400 83,843 1,38,555 1,60,572
Reported Net Profit 4,635 4,774 4,074 16,498 34,288 Current Liab. & Prov. 2,49,922 2,71,568 3,10,478 3,50,438 3,59,829
Adjusted Net Profit 4,635 4,774 4,074 16,498 34,288 Current Liabilities 1,20,942 1,46,957 1,69,687 1,93,174 1,98,175
Net Margin 2.2% 2.0% 1.5% 4.9% 9.1% Provisions & Others 1,28,980 1,24,611 1,40,791 1,57,264 1,61,655
Diluted Share Cap. (mn) 3,482.1 3,482.1 3,482.1 3,482.1 3,482.1 Net Current Assets 2,49,542 2,60,278 2,59,075 2,64,948 2,78,097
Diluted EPS (INR) 1.3 1.4 1.2 4.7 9.8 Total – Assets 2,77,215 2,87,904 2,87,166 2,93,688 3,07,690
Diluted EPS Growth 0.0% 3.0% -14.7% 305.0% 107.8% Source: Company, JM Financial
Total Dividend + Tax 1,393 1,393 1,222 4,949 10,286
Dividend Per Share (INR) 0.4 0.4 0.4 1.4 3.0
Cash Flow Statement (INR mn)

Dupont Analysis
Profit before Tax 4,370 4,496 4,908 19,877 41,311
Net Margin 2.2% 2.0% 1.5% 4.9% 9.1%
Depn. & Amort. 3,141 2,514 2,726 2,861 3,009
Asset Turnover (x) 0.4 0.4 0.5 0.5 0.6
Net Interest Exp. / Inc. (-) 3,547 5,214 4,164 3,820 3,219
Leverage Factor (x) 2.0 2.0 2.1 2.2 2.2
Inc (-) / Dec in WCap. 5,861 -11,059 47,121 18,064 7,258
Others -14,405 -9,685 -5,991 -6,590 -7,249 RoE 1.7% 1.8% 1.5% 6.0% 11.6%
Taxes Paid 4,089 1,104 -834 -3,379 -7,023

Operating Cash Flow 6,603 -7,416 52,094 34,652 40,524 Key Ratios
Capex -2,243 -1,806 -3,191 -3,510 -3,861 Y/E March FY22A FY23A FY24E FY25E FY26E
Free Cash Flow 4,360 -9,222 48,904 31,142 36,663 BV/Share (INR) 76.1 77.0 77.9 81.2 88.1
Inc (-) / Dec in Investments -3,573 254 -50,000 -50,000 -20,000 ROIC 1.8% 1.8% 1.0% 5.2% 10.4%
Others 1,060 16,357 5,991 6,590 7,249 ROE 1.7% 1.8% 1.5% 6.0% 11.6%
Investing Cash Flow -4,756 14,805 -47,200 -46,920 -16,612 Net Debt/Equity (x) -0.1 0.0 0.0 0.0 0.0
Inc / Dec (-) in Capital 0 0 0 0 0 P/E (x) 103.7 100.7 118.0 29.1 14.0
Dividend + Tax thereon -2,039 -1,392 -1,222 -4,949 -10,286 P/B (x) 1.8 1.8 1.8 1.7 1.6
Inc / Dec (-) in Loans -240 5,902 -3,590 -5,026 -10,000 EV/EBITDA (x) 61.9 65.3 80.7 24.5 11.9
Others 4,955 -17,011 -4,164 -3,820 -3,219 EV/Sales (x) 2.2 2.0 1.7 1.4 1.3
Financing Cash Flow 2,676 -12,500 -8,977 -13,795 -23,505 Debtor days 571 567 448 374 326
Inc / Dec (-) in Cash 4,522 -5,111 -4,082 -26,063 407 Inventory days 113 106 96 96 96
Opening Cash Balance 67,015 71,537 66,426 62,344 36,281 Creditor days 176 195 191 192 187
Closing Cash Balance 71,537 66,426 62,344 36,281 36,689 Source: Company, JM Financial

APPENDIX I
JM Financial Inst itut ional Secur ities Lim ited

Corporate Identity Number: U67100MH2017PLC296081
Member of BSE Ltd. and National Stock Exchange of India Ltd.
SEBI Registration Nos.: Stock Broker - INZ000163434, Research Analyst - INH000000610
Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India.
Board: +9122 6630 3030 | Fax: +91 22 6630 3488 | Email: jmfinancial.research@jmfl.com | www.jmfl.com
Compliance Officer: Mr. Sahil Salastekar | Tel: +91 22 6224 1073 | Email: sahil.salastekar@jmfl.com
Grievance officer: Mr. Sahil Salastekar | Tel: +91 22 6224 1073 | Email: instcompliance@jmfl.com
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Definition of ratings
Rating Meaning
Buy Total expected returns of more than 10% for stocks with market capitalisation in excess of INR 200 billion and REITs* and more than
15% for all other stocks, over the next twelve months. Total expected return includes dividend yields.
Hold Price expected to move in the range of 10% downside to 10% upside from the current market price for stocks with market
capitalisation in excess of INR 200 billion and REITs* and in the range of 10% downside to 15% upside from the current market price
for all other stocks, over the next twelve months.
Sell Price expected to move downwards by more than 10% from the current market price over the next twelve months.
* REITs refers to Real Estate Investment Trusts.
Research Analyst(s) Certification
The Research Analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that:
All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and
No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research
report.
Important Disclosures
This research report has been prepared by JM Financial Institutional Securities Limited (JM Financial Institutional Securities) to provide information about the
company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its associates solely for the purpose of information of the select
recipient of this report. This report and/or any part thereof, may not be duplicated in any form and/or reproduced or redistributed without the prior written
consent of JM Financial Institutional Securities. This report has been prepared independent of the companies covered herein.
JM Financial Institutional Securities is registered with the Securities and Exchange Board of India (SEBI) as a Research Analyst and a Stock Broker having trading
memberships of the BSE Ltd. (BSE) and National Stock Exchange of India Ltd. (NSE). No material disciplinary action has been taken by SEBI against JM Financial
Institutional Securities in the past two financial years which may impact the investment decision making of the investor. Registration granted by SEBI and
certification from the National Institute of Securities Market (NISM) in no way guarantee performance of JM Financial Institutional Securities or provide any
assurance of returns to investors.
JM Financial Institutional Securities renders stock broking services primarily to institutional investors and provides the research services to its institutional
clients/investors. JM Financial Institutional Securities and its associates are part of a multi-service, integrated investment banking, investment management,
brokerage and financing group. JM Financial Institutional Securities and/or its associates might have provided or may provide services in respect of managing
offerings of securities, corporate finance, investment banking, mergers & acquisitions, broking, financing or any other advisory services to the company(ies)
covered herein. JM Financial Institutional Securities and/or its associates might have received during the past twelve months or may receive compensation from
the company(ies) mentioned in this report for rendering any of the above services.
JM Financial Institutional Securities and/or its associates, their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell
the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) covered under this report or (c) act as an advisor or lender/borrower to,
or may have any financial interest in, such company(ies) or (d) considering the nature of business/activities that JM Financial Institutional Securities is engaged in,
it may have potential conflict of interest at the time of publication of this report on the subject company(ies).
Neither JM Financial Institutional Securities nor its associates or the Research Analyst(s) named in this report or his/her relatives individually own one per cent or
more securities of the company(ies) covered under this report, at the relevant date as specified in the SEBI (Research Analysts) Regulations, 2014.
The Research Analyst(s) principally responsible for the preparation of this research report and their immediate relatives are prohibited from buying or selling debt
or equity securities, including but not limited to any option, right, warrant, future, long or short position issued by company(ies) covered under this report. The
Research Analyst(s) principally responsible for the preparation of this research report or their immediate relatives (as defined under SEBI (Research Analysts)
Regulations, 2014); (a) do not have any financial interest in the company(ies) covered under this report or (b) did not receive any compensation from the
company(ies) covered under this report, or from any third party, in connection with this report or (c) do not have any other material conflict of interest at the time
of publication of this report. Research Analyst(s) are not serving as an officer, director or employee of the company(ies) covered under this report.

While reasonable care has been taken in the preparation of this report, it does not purport to be a complete description of the securities, markets or
developments referred to herein, and JM Financial Institutional Securities does not warrant its accuracy or completeness. JM Financial Institutional Securities may
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This
report is provided for information only and is not an investment advice and must not alone be taken as the basis for an investment decision.
This research report is based on the fundamental research/analysis conducted by the Research Analyst(s) named herein. Accordingly, this report has been
prepared by studying/focusing on the fundamentals of the company(ies) covered in this report and other macro‐economic factors. JM Financial Institutional
Securities may have also issued or may issue, research reports and/or recommendations based on the technical/quantitative analysis of the company(ies) covered
in this report by studying and using charts of the stock's price movement, trading volume and/or other volatility parameters. As a result, the
views/recommendations expressed in such technical research reports could be inconsistent or even contrary to the views contained in this report.
The investment discussed or views expressed or recommendations/opinions given herein may not be suitable for all investors. The user assumes the entire risk of
any use made of this information. The information contained herein may be changed without notice and JM Financial Institutional Securities reserves the right to
make modifications and alterations to this statement as they may deem fit from time to time.
This report is neither an offer nor solicitation of an offer to buy and/or sell any securities mentioned herein and/or not an official confirmation of any transaction.
This report is not directed or intended for distribution to, or use by any person or entity who is a citizen or resident of or located in any locality, state, country or
other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject JM Financial Institutional
Securities and/or its affiliated company(ies) to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be
eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession this report may come, are required to inform themselves of
and to observe such restrictions.
Additional disclosure only for U.S. persons: JM Financial Institutional Securities has entered into an agreement with JM Financial Securities, Inc. ("JM Financial
Securities"), a U.S. registered broker-dealer and member of the Financial Industry Regulatory Authority ("FINRA") in order to conduct certain business in the
United States in reliance on the exemption from U.S. broker-dealer registration provided by Rule 15a-6, promulgated under the U.S. Securities Exchange Act of
1934 (the "Exchange Act"), as amended, and as interpreted by the staff of the U.S. Securities and Exchange Commission ("SEC") (together "Rule 15a-6").
This research report is distributed in the United States by JM Financial Securities in compliance with Rule 15a-6, and as a "third party research report" for
purposes of FINRA Rule 2241. In compliance with Rule 15a-6(a)(3) this research report is distributed only to "major U.S. institutional investors" as defined in Rule
15a-6 and is not intended for use by any person or entity that is not a major U.S. institutional investor. If you have received a copy of this research report and are
not a major U.S. institutional investor, you are instructed not to read, rely on, or reproduce the contents hereof, and to destroy this research or return it to JM
Financial Institutional Securities or to JM Financial Securities.
This research report is a product of JM Financial Institutional Securities, which is the employer of the research analyst(s) solely responsible for its content. The
research analyst(s) preparing this research report is/are resident outside the United States and are not associated persons or employees of any U.S. registered
broker-dealer. Therefore, the analyst(s) are not subject to supervision by a U.S. broker-dealer, or otherwise required to satisfy the regulatory licensing
requirements of FINRA and may not be subject to the Rule 2241 restrictions on communications with a subject company, public appearances and trading
securities held by a research analyst account.
Any U.S. person who is recipient of this report that wishes further information regarding, or to effect any transaction in, any of the securities discussed in this
report, must contact, and deal directly through a U.S. registered representative affiliated with a broker-dealer registered with the SEC and a member of FINRA. In
the U.S., JM Financial Institutional Securities has an affiliate, JM Financial Securities, Inc. located at Harborside Financial Center, 2500 Plaza 5, 25th Floor, Office
No. 2558, Jersey City, NJ 07311. Telephone +1 (201) 633-3610 which is registered with the SEC and is a member of FINRA and SIPC.
Additional disclosure only for U.K. persons: Neither JM Financial Institutional Securities nor any of its affiliates is authorised in the United Kingdom (U.K.) by the
Financial Conduct Authority. As a result, this report is for distribution only to persons who (i) have professional experience in matters relating to investments
falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the "Financial Promotion Order"), (ii)
are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Promotion Order, (iii) are outside
the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial
Services and Markets Act 2000) in connection with the matters to which this report relates may otherwise lawfully be communicated or caused to be
communicated (all such persons together being referred to as "relevant persons"). This report is directed only at relevant persons and must not be acted on or
relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will
be engaged in only with relevant persons.
Additional disclosure only for Canadian persons: This report is not, and under no circumstances is to be construed as, an advertisement or a public offering of the
securities described herein in Canada or any province or territory thereof. Under no circumstances is this report to be construed as an offer to sell securities or as
a solicitation of an offer to buy securities in any jurisdiction of Canada. Any offer or sale of the securities described herein in Canada will be made only under an
exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable
securities laws or, alternatively, pursuant to an exemption from the registration requirement in the relevant province or territory of Canada in which such offer or
sale is made. This report is not, and under no circumstances is it to be construed as, a prospectus or an offering memorandum. No securities commission or
similar regulatory authority in Canada has reviewed or in any way passed upon these materials, the information contained herein or the merits of the securities
described herein and any representation to the contrary is an offence. If you are located in Canada, this report has been made available to you based on your
representation that you are an “accredited investor” as such term is defined in National Instrument 45-106 Prospectus Exemptions and a “permitted client” as
such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Under no circumstances is the
information contained herein to be construed as investment advice in any province or territory of Canada nor should it be construed as being tailored to the
needs of the recipient. Canadian recipients are advised that JM Financial Securities, Inc., JM Financial Institutional Securities Limited, their affiliates and authorized
agents are not responsible for, nor do they accept, any liability whatsoever for any direct or consequential loss arising from any use of this research report or the
information contained herein.

Bhel JM

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Bhel JM

Uploaded by

Copyright:

Available Formats

04 September 2023 India | Industrials | Initiating Coverage

Bharat Heavy Electricals Ltd | BUY

Financial Summary (INR mn)

JM Financial Institutional Securities Limited

Table of Contents Page No.

BHEL: Steam blowing, again 2

The rally has just begun! 4

How we got here? 13

Connecting the dots 17

About the company 24

Major business areas 25

Key focus charts 29

JM Financial Institutional Securities Limited Page 3

Exhibit 1. The rally has just begun!

entrepreneurship, skill development, consultancy

Capacity Expansion, control, Integration of listing, manpower ERP/SAP, Performance sustenance;

India’s economic Cost; Covid-19

JM Financial Institutional Securities Limited Page 4

Exhibit 2. Energy consumption forecast as per NEP

Total Energy consumption - MU 11,38,408 16,10,053 21,33,380 7.18 5.79

T&D losses - MU 2,43,237 2,97,782 3,40,396

T&D losses (Ex-Bus) - % 17.6 15.61 13.76

Energy Requirement (Ex-Bus) - MU 13,81,646 19,07,835 24,73,776 6.67 5.33

Annual Load Factor - % 77.65 78.57 77.07

Peak Electricity Demand (Ex-Bus) - MW 2,03,115 2,77,201 3,66,393 6.42 5.74

Exhibit 3. Capacity additions required (MW)

Small Hydro 4,944 5,450 506 -

Solar PV 66,780 3,64,566 2,97,786 55,227 2,42,559

Wind 42,633 1,21,895 79,262 8,697 70,565

Biomass 10,248 15,500 5,252 5,252

Nuclear 6,780 19,680 12,900 8,000 4,900

Total non-Fossil 1,78,235 5,89,269

% share 44% 67%

Coal + Lignite 2,05,236 2,59,643 54,407 26,750 27,657

Gas 24,824 24,824 - - -

Total Fossil 2,30,060 2,84,467 54,407 26,750 27,657

Total 4,08,295 8,73,736 54,407 26,750 27,657

PSP 4,746 26,686 21,940 21,940

BESS(MW) 47,244 47,244 47,244

Total Storage 73,930 69,184 69,184

JM Financial Institutional Securities Limited Page 5

 What we are tracking in 2023?

Exhibit 4. Status of under-construction coal-fired power plants

JM Financial Institutional Securities Limited Page 6

2x800 MW NTPC Singrauli-III 1,600 DPR, TOR, EC done; NIT to issue

3x800 MW NLC Talabira STPS 2,400 Technical bid under evaluation

1x800 MW DVC Durgapur 800 DPR under approval

2x800 MW DVC Koderma 1,600 EC approval awaited/ NIT issued in May’23

1x660 MW SJVNL Buxar Extn. 1,320 DPR under approval

2x660 MW Korba, CG 1,320 TOR approved/ DPR approved/ EC under approval

1x660 MW Chandrapur, Mah 660 DPR under preparation

1x660 MW Amarkantak, MP 660 DPR approved/ NIT likely soon

1x660 MW Satpura TPP, MP 660 DPR approved/ NIT likely soon

2x660 MW Koradi, Mah 1,320 DPR approved/ NIT likely soon

1x800 MW Ukai, Guj 800 DPR approved/ EC accorded/ NIT to issue

2x660 MW Chhabra, Raj 1,320 DPR approved/ Under review

1x800 MW Kalisindh, Raj 800 DPR approved/ Under review

Thermal power projects under development for future

 3x660 MW NTPC Nabinagar TPS

 2x800 MW KTPCL Godhna TPS

 2x800 MW UPRVUNL, Obra-D TPS

 2x800 MW UPRVUNL, Anpara-D TPS

JM Financial Institutional Securities Limited Page 7