Motilal Oswal Financial Services Ltd. initiated coverage on Bharat Dynamics Ltd. with a 'neutral' rating and a target price of Rs 1,900. The brokerage expressed confidence in the defence manufacturer's business model and its capacity to scale up its revenues and order book in the current scenario, citing fair valuation levels.
Motilal Oswal will look for a better entry point at lower price levels. The current target price implies a 4.21% downside from Wednesday's closing price.
Bharat Dynamics will likely post a revenue CAGR at 35% over financial years 2025 and 2028. Its Ebitda margin will likely remain strong at 24–26% on the back of ongoing investments in backward integration and an improved share of indigenised products. This is expected to shore up Ebitda and net profit CAGR to 64% and 51% over financial years 2025 and 2028.
Bharat Dynamics is currently trading at 70 times the price-to-earnings on financial year 2026 estimates, Motilal Oswal Financial Services said.
Bharat Dynamics currently holds an order book of Rs 22,700 crore and a pipeline of Rs 50,000 crore. Motilal Oswal expects a rebound in revenue growth. The company may benefit from the upcoming emergency procurement pipeline as well as large orders such as the Quick Reaction Surface-to-Air Missile.
The company had been facing revenue headwinds due to supply chain disruptions and difficulties in procuring essential components from Russia and Israel. However, the brokerage said these issues are now being resolved.
Bharat Dynamics is now expanding into new areas, including drone-delivered payloads such as bombs, missiles, mines, guided mines, warhead manufacturing, and engines for cruise missiles, Motilal Oswal Financial Services said. The defence manufacturer is also pursuing partnerships with foreign original equipment manufacturers for new weapons and potential transfer of technology alongside its collaboration with the Defence Research and Development Organisation's programmes.
Bharat Dynamics is expected to benefit from positive industry tailwinds as missile markets expand in India. Moreover, defence sector spending is increasing across the world, which will augur well for the overall Indian defence sector, Motilal Oswal Financial Services said.
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