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The shares of Bharat Heavy Electricals Limited (BHEL), a public sector undertaking (PSU) nose-dived after reporting a marginal increase in its net profit for the quarter that ended September 2022 (Q2FY23). Its share price declined to the tune of 7% in the past two days. They were trading at ₹ 70.65 apiece, at 11:23 AM on Tuesday. 

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The state-run power manufacturer reported its results for the July to September quarter (Q2FY23). Its income from sales increased marginally to ₹ 4,927.95 crores, from ₹ 4,910.62 crores (up, according to a filing with the exchanges. However, its other income grew over three-fold to ₹ 216.17 crores in the second quarter of FY23, taking the total income to ₹ 5,418.74 crores. 

The company reported a consolidated net profit of ₹12.1 crores for the September quarter on the back of the rise in other income and sales growth in the power segment. BHEL’s power segment saw a 6.36 per cent on a year-on-year (YoY) basis to ₹ 3,814.35 crores. However, its industrial sales declined nearly 16 per cent to ₹1,113.60 crores during the quarter. 

Global research firm Goldman Sachs has maintained a “sell” rating on the stock with a target price of ₹ 30 per share. This translates to a downside of 57.53% as compared to its current share price of ₹ 70.65. 

According to Goldman Sachs, the results were weak as the path to profitability is still uncertain. “Lack of opportunities on thermal power while diversification away from its key segment is likely to be gradual. We expect the company to turn profitable in FY24,” the brokerage added. 

Jefferies has raised the target price of the company from ₹ 35 to ₹ 40. However, it has an “underperform” rating on the stock. The given target indicates a downside of 43.38% as compared to its current share price. 

BHEL’s share price has increased by 14.74% year-to-date. It functions under the Ministry of Heavy Industries, Government of India. It is an integrated power plant equipment manufacturer that is engaged in the design, engineering, manufacture, erection, testing, commissioning and servicing of a wide range of products and services. It caters to the core sectors of the economy including power, transmission, renewable energy, oil and defence. 

Written by Simran Bafna 

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