Target: ₹1,900
CMP: ₹1,590.70
Bharat Dynamics Ltd (BDL) delivered strong 30 per cent y-o-y growth in execution in Q1FY26 on a strong order-book and the easing of supply chain issues as compared to last year. EBITDA margins were negative on account of negative operating leverage in a seasonally-weak quarter.
EBITDA loss, though, declined year on year. PAT performance was ahead of the consensus estimates. With a strong order book of nearly ₹23,300 crore, we expect execution to scale up further in the coming quarters, particularly from Akash, Astra Mk1, MRSAM and armament projects. We expect BDL to benefit from a strong prospect pipeline of nearly ₹50,000 crore and an emergency procurement programme.
We had initiated coverage on BDL in July-25 with Neutral recommendation due to high valuations of 52x/38x FY27E/FY28E EPS then. Since then, the stock has come down by 25 per cent and is now trading at reasonable valuations of 39x/29x FY27E/FY28E EPS. We maintain our estimates and expect execution and margins to scale up in the coming quarters. We, thus, upgrade the stock to Buy from Neutral with an unchanged target price of ₹1,900, based on 42x Sep’27E EPS.
Key risks for the company include a decline or reprioritisation of the Defence Budget, termination of existing contracts or failure to succeed in tendering projects, changes in procurement rules and regulations of the MoD and the government, and supply-chain-related issues.
Published on August 13, 2025
