BEL's Q4 Beat, Solid FY26 Guidance Drive Macquarie's Target Hike
Macquarie highlighted BEL’s collaboration with DRDO on the indigenous S-400 missile system as a significant future opportunity.
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Macquarie has reiterated its ‘outperform’ rating on Bharat Electronics Ltd. and increased its target price to Rs 400 from Rs 365, following a strong fourth quarter performance, improved financial year 2026 guidance, and a healthy order pipeline.
BEL ended financial year 2025 on a strong note, with fourth quarter Ebitda and profit comfortably exceeding Macquarie and consensus estimates. While revenue was in line with provisional disclosures, Ebitda margins surprised at 30.8% versus expectations of around 26%, helped by lower-than-expected other expenses, including provisions.
BEL has guided for 15% year-on-year revenue growth and a 27% Ebitda margin in fiscal 2026, alongside order inflows of Rs 27,000 crore, up from Rs 18,700 crore in the previous fiscal.
Although the Rs 30,000 crore QR-SAM order is now expected by February–March 2026, with potential spillover into fiscal 2027, a number of fast-track defence procurement opportunities are expected in the coming weeks. At least 8–10 BEL products are in contention, which enhances near-term order visibility.
Macquarie has raised its financial year 2026E and financial year 2027E EPS estimates by 7% each, driven by higher margin assumptions. Macquarie expects BEL to deliver a 15% EPS CAGR and 27% ROE over financial year 2025–2028, supported by a robust domestic order book, emerging export opportunities, and strong government support for defence manufacturing.
Macquarie highlighted BEL’s collaboration with DRDO on the indigenous S-400 missile system as a significant future opportunity worth up to Rs 20,000 crore over the next four-five years. Defence export leads, including to Europe, are also gradually gaining traction. BEL plans to continue scaling its research and development and capex investments to support long-term growth.
Net working capital increased in fiscal 2025, with receivables and inventories rising 23% and 22%, respectively versus 17% sales growth. However, Macquarie does not view this as alarming, attributing it to lower order advances due to weaker financial year 2025 order inflows. Government focus on defence capex also remains strong, the brokerage added.
