BHEL, Power Grid Corporation and BEML were among major gainers in PSU segment on Friday. Among losers were Dredging Corporation, Rail Vikas Nigam, Container Corporation, NHPC and GAIL. In May 2025, India’s government-linked industrial powerhouses—BHEL, Power Grid Corporation, BEML, NMDC, and IRFC—are navigating contrasting trajectories shaped by a mix of robust order flows, policy-driven momentum, and valuation anxiety. A strong infrastructure and defense push is fueling optimism, yet concerns over overheated stock prices and margin pressures remain salient.

BHEL: A Revival Tempered by Valuation Anxiety

Bharat Heavy Electricals Ltd (BHEL) posted a 3% year-on-year increase in Q4FY25 net profit to Rs 504.45 crore, alongside 9% revenue growth to Rs 8,993 crore. For the full fiscal year, net profit surged 89% to Rs 533.9 crore, supported by record-breaking order inflows amounting to Rs 92,534 crore.

A major contract—a Rs 11,800 crore thermal power plant order in Chhattisgarh—secured in March 2025, stands out as a strategic milestone. Technically, the stock broke out of a long-standing downtrend on May 17, with bullish chartists eyeing a medium-term target of Rs 292 if momentum holds.

However, fundamental analysts are split. Kotak Institutional Equities maintains a "Sell" rating, flagging a 35x FY26 P/E ratio as unsustainable, and pegs a conservative target of Rs 115. CLSA is also cautious with a "Reduce" rating, albeit with a revised target of Rs 198, reflecting optimism around thermal capex but warning of execution risk and margin compression.

Meanwhile, JM Financial highlights a brighter picture, projecting FY26 net profits of Rs 737.9 crore—a potential YoY increase of 50.7%. Nonetheless, the contrast between forward-looking optimism and valuation discomfort defines BHEL’s current narrative.

Power Grid: Dividend Stability Meets Energy Transition Tailwinds

Power Grid Corporation of India continues to be the poster child of infrastructure stability. As of May 23, shares traded at Rs 292.15, modestly up 0.43% on the day amid neutral market sentiment.

The company reported 9% sequential revenue growth to Rs 12,275 crore in Q1FY25, with a resilient net profit margin of 33.75%. It declared a Rs 10.75/share dividend for the fiscal year, reinforcing its reputation as a reliable income stock.

ICICI Securities and Motilal Oswal have both reiterated "Buy" ratings, assigning target prices of Rs 385 and Rs 425, respectively. Analysts cite robust asset capitalization and India’s ongoing transmission grid modernization as key growth drivers. PowerGrid’s order book stands at a healthy Rs 1.2 lakh crore, providing multi-year revenue visibility.

With 22 analysts weighing in, the consensus breaks down into 14 "Buy," 2 "Hold," and 5 "Sell" recommendations—a broadly positive but measured outlook.

BEML: Strong Pipeline, Worrisome Valuation

Defense and railway equipment manufacturer BEML Ltd has seen a 2.58% rise in share price to Rs 3,717.90 as of May 23, clocking a substantial 17.28% monthly return—riding on optimism surrounding defense and rail infrastructure orders.

The company announced a Rs 15/share dividend (150% of face value) on May 9, cementing its position as a cash-generative PSU. But market valuation remains a sticking point. Smart Investing notes an intrinsic value of Rs 1,488—well below the current market price—labeling the stock "fundamentally strong but overvalued".

BEML currently trades at a trailing P/E of 57.66 and P/B of 5.68, metrics that reflect lofty expectations and potentially limited near-term upside despite an encouraging pipeline.

NMDC: Tactical Momentum Play on Commodities

National Mineral Development Corporation (NMDC) is benefiting from a resurgence in iron ore demand. Bajaj Broking has issued a "Buy" recommendation for the stock in the Rs 70–72 range, with a target of Rs 78—offering an estimated 11% upside.

Technically, the stock has cleared key exponential moving averages (20/50/200-day), supported by bullish RSI trends. Analysts are mildly positive, with an average price target of Rs 72.94 from 17 sources. The highest target stands at Rs 94, while the most bearish call sits at Rs 55.

Looking ahead to Q1 FY27, NMDC is expected to post 26.01% revenue growth and a 35.17% EPS increase. However, longer-term prospects remain closely tied to global commodity price cycles—a variable outside the company's control.

IRFC: New Navratna, Strategic Railway Capital Backbone

Indian Railway Finance Corporation (IRFC) recently earned Navratna status on May 16, enhancing its autonomy in strategic decision-making and capital raising. For Q4 FY25, IRFC reported a 6% YoY rise in net profit to Rs 1,717 crore, while sanctioning Rs 7,500 crore in loans to NTPC Renewable Energy.

Analysts at FIGW have set a target price of Rs 203.32 by December 2025, projecting a 65% upside. In contrast, the Economic Times aggregates a more conservative consensus—an average target of Rs 167.50, with 12 analysts holding a "Hold" view.

The PSU sanctioned Rs 1.2 lakh crore in loans in FY25 and trades at a P/B ratio of 1.2x, below the sector average. With the government’s focus on rail modernization and green energy financing, IRFC appears strategically aligned for long-term relevance.

Comparative Snapshot of Analyst Recommendations

Here is a summary table of recent broker targets and ratings:

Strategic Themes Driving Market Dynamics

Infrastructure Momentum: Both BHEL and PowerGrid are direct beneficiaries of the government’s multi-year push into power infrastructure—spanning both conventional and renewable sectors.

Defense & Rail Capex: BEML and IRFC stand to gain from increased allocations to defense production and railway modernization. However, market optimism must be balanced with scrutiny over stock valuations.

Commodities and Cyclicality: NMDC offers short-term trading opportunities amid bullish sentiment on iron ore, but its trajectory is tethered to volatile global prices.