B H E L (BHEL)

FairStock Score: 43/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 0/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• High promoter holding of 63.17% provides ownership stability.
• Sales grew 10.36% and profit grew 56.87%, showing recent demand momentum.
• Piotroski F-Score of 8/9 points to improving financial health.
• Debt-to-equity of 0.45 is moderate and not highly leveraged.

Concerns

• Valuation is extreme: P/E 113.30, P/B 4.76, EV/EBITDA 134.09; Graham Number is just ₹61.14 versus price ₹337.95.
• ROE of only 3.29% and ROCE of 4.87% indicate weak return on capital.
• Free cash flow is negative at -₹539 Cr, questioning the quality of reported profits.
• Altman Z-Score of 1.67 signals financial stress risk, and dividend yield of 0.19% gives negligible downside support.

AI Analysis

Let me start with what I can understand. BHEL makes heavy electrical equipment, a business tied to power capital expenditure. But understanding the business is not enough; I need a business that earns good returns on capital while I wait. Here, ROE is just 3.29% and ROCE is 4.87%. That is far below what I expect from a durable franchise. The 63.17% promoter holding gives stability, but government ownership does not automatically create a moat. The latest quarter shows sales of ₹8,473 Cr and net profit of ₹390 Cr, a thin 4.6% margin. Sales grew 10.36% and profit grew 56.87%, but high growth from a low earnings base can deceive. Free cash flow is minus ₹539 Cr, so reported profits are not showing up in cash. A Piotroski score of 8/9 tells me recent fundamentals have improved, but I have learned to be cautious when the price already celebrates improvement. At ₹337.95, the market cap is ₹92,257 Cr. The P/E is 113.30, EV/EBITDA is 134.09, and price-to-book is 4.76 against book value of ₹71. Graham's number is ₹61.14, meaning the price offers a margin of safety of negative 333%. In other words, I am not being protected by any margin of safety. The dividend yield of 0.19% does not compensate me for waiting. Debt-to-equity is 0.45, not alarming, but Altman Z of 1.67 sits in the caution zone. This looks like a cyclical improvement story being priced as a permanent compounder. I would rather watch from the sidelines until earnings quality, cash conversion, and price improve.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer