Are BHEL latest results good or bad?

BHEL's latest financial results for Q2 FY26 indicate a significant recovery from the previous quarter's loss, showcasing a consolidated net profit of ₹374.89 crores, which marks a substantial year-on-year growth of 253.17%. This recovery is complemented by a revenue increase to ₹7,511.80 crores, reflecting a 14.09% rise compared to the same quarter last year and a notable 36.90% sequential growth from Q1 FY26.
The operating margin, excluding other income, improved to 7.73%, a positive shift from a negative margin in the prior quarter and an increase from the previous year's figure. The PAT margin also showed improvement, reaching 4.99%, up from a negative margin in Q1 FY26. However, the volatility in BHEL's quarterly results raises concerns regarding the sustainability of this recovery, as the company has experienced significant fluctuations in profitability over recent periods.

Despite these positive indicators, BHEL's operational metrics reveal underlying challenges, particularly in capital efficiency, with a return on equity (ROE) of only 1.32%. The company's reliance on non-operating income, which constituted a considerable portion of its profit before tax, suggests that core business profitability remains under pressure.

Furthermore, the company has seen an adjustment in its evaluation, reflecting a disconnect between its stock price and operational performance. The balance sheet remains debt-free, which is a positive aspect, but the increase in current liabilities and the mixed quality of current assets warrant careful monitoring.

In summary, while BHEL's recent results demonstrate a recovery and improved financial performance, the underlying operational challenges and volatility in results highlight the need for cautious assessment moving forward.