If you are about to open a demat account and want to participate in the Indian stock market, you should keep an eye on stocks with a huge growth potential because such stocks can help you generate considerable returns over a long period of time.
In 2024, Bharat Heavy Electricals Limited (BHEL) – a major capital goods manufacturer in India – became one such stock. BHEL’s share price jumped by 25% from January 1, 2024, to November 27, 2024. In the same time frame, the benchmark index, BSE Sensex, moved up by 10.8%. In other words, BHEL’s share price has moved up by more than twice compared to BSE Sensex in 2024 so far.
Let us take a deep dive into BHEL’s stock to understand how it has performed recently.
BHEL’s share price vis-à-vis BSE Sensex in 2024 so far
BHEL has outperformed Sensex throughout 2024 by a considerable margin. For example, BHEL’s share price increased by a whopping 60.9% between January 1, 2024 and May 21, 2024. Compared to this, Sensex had moved up by only 2.4% in the same duration.
Between January 1, 2024, and July 9, 2024, BHEL’s share price had moved up by 66% compared to an 11.1% increase in BSE Sensex values.
However, since July 9 this year, BHEL has mostly fallen, but it still has increased more than Sensex if the 2024 data is considered. Based on these numbers, it cannot be denied that BHEL has outperformed BSE Sensex quite thoroughly. Now, we need to analyse the business performance of BHEL to understand what has caused a rally in its stock price in 2024.
How has BHEL’s business performed in 2024?
If we analyse the financial performance of BHEL, we will notice that it did better in 2024 than in 2023. For example, its consolidated net sales in the September 2024 quarter were 28% more than its consolidated net sales in the September 2023 quarter.
The company reported a consolidated net profit of ₹89.5 crore in the September 2024 quarter compared to a consolidated net loss of ₹250 crore in the September 2023 quarter.
BHEL’s consolidated net sales in the June 2024 quarter were 10% up compared to its net sales in the June 2023 quarter. In the June 2024 quarter, the company reported a consolidated net loss of ₹225.6 crore compared to a consolidated net loss of ₹360 crore in the June 2023 quarter.
The numbers show that BHEL has done well in 2024, which explains why its stock price has surged. Based on the numbers available on BHEL’s website, its order inflow in the current financial year 2024-25 up to the second quarter (September 2024 quarter) was 23% up compared to the order inflow in the corresponding period in the previous financial year.
When a company’s order inflow grows, it shows that its revenue is likely to grow in the future, which provides visibility in its business. Besides, the company posted a number of achievements in the September 2024 quarter.
For example, it designed and manufactured a 200 kW High Temperature Super Conducting (HTSC) motor thanks to indigenous research and development (R&D).
Besides, BHEL also successfully designed and manufactured the largest size and highest rating vertical Kaplan runner in India for Polavaram HEP. Clearly, the growth in BHEL’s share price is due to its business performance.
Conclusion
BHEL can be a stock worth watching out for if you are about to open demat account. However, at times, the stock market discounts the future growth potential of a stock in its current stock price. In simple words, it means that when a stock price sharply rises, it is possible that the market has already factored in a lot of its future growth in its current price. Therefore, unless BHEL’s business keeps on growing at a very high rate, its stock price may not increase sharply in the future. Therefore, before investing in BHEL, you should thoroughly research its business and then make a decision.
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