With the latest decline, the stock is down 15% in three sessions, resuming its downward trend after closing higher in the previous session.
What should investors do?BHEL shares ended the previous week about 9% lower, though the stock attempted a partial recovery on Friday after Thursday’s sharp decline. According to Anand James of Geojit Investments, the fall appears to be a single-day event, followed by the formation of an inside bar pattern, which supports the possibility of an upside move in the week ahead. However, he cautioned that the stock breached its 50-day simple moving average for the first time since mid-September and closed below it last week. As a result, he advised waiting for a pullback above Rs 280 as confirmation before turning decisively bullish.What’s ailing the stock?
The selloff comes after media reports suggesting that India plans to scrap curbs on Chinese firms bidding for government contracts. These restrictions were introduced in 2020 under the Atmanirbhar Bharat package and subsequent amendments to the General Financial Rules, following India-China border tensions.As part of those measures, bidders from countries sharing a land border with India were required to obtain mandatory political and security clearances, effectively restricting imports from China across sensitive sectors, including power and energy.What are experts saying?International brokerage firm Jefferies struck a cautious tone last week, calling the possible easing of restrictions a “potential negative development” for some industrial players.
It said that companies such as BHEL, Afcons, L&T, are likely to see the highest impact, adding that details were still awaited on whether the move would materialise and how it would be implemented. The brokerage said defence would see the least impact, while transmission equipment could be relatively insulated due to national security considerations.
Jefferies highlighted that thermal power equipment and railways were being mentioned in news reports, but said the nuances of any policy change would be key.
Offering a contrarian view, domestic brokerage firm JM Financial said the removal of restrictions, especially at the component level, could actually benefit public sector undertakings such as BHEL rather than hurt them.
“Removal of restrictions at the components level (e.g., CRGO steel) will benefit PSUs like BHEL,” the brokerage said, adding that even a broader easing would have “little impact” given developers’ past experience with Chinese equipment and strong domestic demand within China itself.
JM Financial noted that before the restrictions, Indian heavy electrical equipment manufacturers imported large quantities of castings, forgings and pipes from China. After the curbs, they were forced to source from Europe, raising costs and delaying execution due to a limited global supplier base.
“We remain optimistic about sustained thermal opportunities and BHEL’s performance (execution, margins),” JM Financial said, maintaining a ‘BUY’ rating with a target price of Rs 363. It expects EBITDA margin to expand from 4.4% in FY25 to at least 10.7% in FY28, with EPS rising from 1.5 to 12.1 over the same period.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
