12.50% Dividend, 200% Gains: Multibagger Defence PSU Bags Rs 11,000 Crore Orders From Adani Power

Bharat Heavy Electricals Limited (BHEL) saw its shares rise by over 2% during early trade on Monday, following the announcement of a significant contract agreement with Adani Power Ltd and its subsidiary, Mahan Energen Ltd. This collaboration is set to propel BHEL into the spotlight as it takes on the massive task of setting up three Supercritical Thermal Power Projects across two Indian states.

The surge in BHEL's stock price was immediate, with the shares climbing to a high of Rs 304 per share on the National Stock Exchange (NSE), marking a 2.63% increase from its previous close.

BHEL's latest venture involves the supply of critical equipment and the supervision of the erection and commissioning of three Supercritical Thermal Power Projects, each with a capacity of 2x800 MW. These projects are located in Kawai, Rajasthan, and Mahan, Madhya Pradesh, areas known for their industrial potential.

In an official statement to the exchanges, BHEL outlined the terms of the contract: "Bharat Heavy Electricals Limited (BHEL) has signed a contract agreement with Adani Power Ltd. and its subsidiary (Mahan Energen Ltd.) for setting up 3 nos. Supercritical Thermal Power projects (each of 2x800 MW rating) in Kawai, Rajasthan & Mahan, Madhya Pradesh."

The partnership is a critical one, as BHEL will be responsible for the supply of Boilers, Turbines, Generators, and associated auxiliaries, along with control and instrumentation. BHEL has committed to completing the Kawai Phase-II project within 49 months, Kawai Phase-III within 52 months, and Mahan Phase-III within 55 months.

Earlier in August, the company secured a 1,600 MW project from Damodar Valley Corporation (DVC). This coal-based unit, which will be established in the Koderma district of Jharkhand, is set to be built on an Engineering, Procurement, and Construction (EPC) basis.

Despite these wins, BHEL has faced challenges in its financial performance. For the quarter ending in June, BHEL reported a 9.6% year-on-year growth in revenue, amounting to Rs 5,484 crore. The company's gross margin improved by 21 basis points, reaching 29.3%. However, BHEL posted a net loss of Rs 212.5 crore for the quarter, which, although lower than the estimates.

Brokerage firm CLSA recently reiterated an 'underperform' rating on BHEL, setting a price target of Rs 220 per share. The firm noted that while BHEL's recent large thermal orders are promising, they will take time to begin execution.

BHEL is set to be included in the Nifty Next 50 index starting from September 30. This inclusion is expected to bring about inflows of approximately $49 million into the stock, according to brokerage firm Nuvama Alternative and Quantitative Research. The inclusion in this index is seen as a positive step for BHEL.

Once a constituent of the Nifty 50 index, BHEL was removed from the benchmark in 2017. The re-entry into a major index like Nifty Next 50 signifies a potential turnaround for the company, as it continues to rebuild its market presence.

As of 12:35 pm on Monday, BHEL shares were trading at Rs 296.90 per share on the NSE, reflecting a modest gain of 0.25%. Over the last 12 months, the stock has delivered multibagger returns, surging by nearly 200%.