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Motilal Oswal Report
Bharat Dynamics Ltd. came under pressure after Motilal Oswal downgraded the stock to ‘Neutral' and sharply cut its target price, citing weak Q4 FY26 performance and persistent execution challenges.
The brokerage revised its target price to Rs 1,150 from Rs 1,500 earlier, implying downside from the current market price of Rs 1,282, and also cut earnings estimates for FY27/FY28 by 25% and 28%, respectively.
Performance impacted by delays from external vendors
Bharat Dynamics' results were weaker than brokerage's estimates, with execution impacted by delays in the supply of radars, seekers, and other components for Akash and Astra Mk1 missiles from external vendors.
The company is likely to book ~Rs 2,000- 2,500 crore of revenues in H1 FY27 from these orders as the supply of these components commences.
Bharat Dynamics may also resort to importing certain components to avoid further delivery delays. While the order book remained healthy at ~Rs 26,000 crore, Motilal Oswal expect overall execution to remain slower than our earlier estimates, with margins likely to stay under pressure due to a higher share of bought-out components.
Thus the brokerage cuts its FY27/FY28 earnings by 25%/28% and downgrade the stock to Neutral with a revised target price of Rs 1,150 (vs Rs 1,500 earlier), based on 42x Jun'28E EPS.
The stock is currently trading at 70.5x/48.1x/38.1x on FY27/FY28/FY29 EPS. Motilal Oswal believes it is prudent to await a sustained ramp-up in execution and improved supply-side visibility.
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