Bharat Electronics Gets Its Highest Target Price From UBS; Now Preferred Over HAL
UBS expects a significant acceleration in BEL's order book for FY25-28, now projected at 17% compared to its previous estimate of 8%.
Bharat Electronics Ltd. has received its highest share price target from UBS, which upgraded the stock from a 'neutral' to a 'buy' rating after its fourth-quarter financial results.
The revised target price of Rs 450 from Rs 320 earlier now implies an upside potential of 17% over the previous close.
The investment bank cited a sharp order book ramp, accelerating margin-accretive revenue, and upside risk for consensus estimates due to recent favourable developments.
Analysts said in a recent note that they believe the market is underestimating the long-term pipeline of BEL, anticipating a faster conversion to revenue. Based on projections for stronger earnings growth and a quicker ramp-up of the order book over the next three years, UBS now prefers BEL over Hindustan Aeronautics Ltd.
They rate HAL as 'neutral' with a price target of Rs 5,600 which shows an upside potential of 11%.
Bharat Electronics-designed and manufactured Air Defence System, Akashteer, was used by Indian armed forces to protect against Pakistani missile and drone raids during Operation Sindoor. (Photo source: BEL/ X profile)
What's Behind The Bull Case
UBS expects a significant acceleration in BEL's order book for FY25-28, now projected at 17% compared to its previous estimate of 8%. This includes an estimated Rs 2.4 lakh crore from their long-term pipeline converting into orders, with Rs 1.4 lakh crore in new orders specifically for FY25-28.
Secondly, major platforms that BEL has integrated or upgraded, such as the Akash missile system, IACC control system, L70 gun upgrade, Schilka weapons system, and multiple radars, are now combat-proven. This critical validation positions the Navratna PSU company to secure both new and repeat orders in both domestic and export markets, analysts said.
"With a three-year industry order pipeline of over $28 billion and BHE's competitive edge, we believe growth potential over the next three years is not fully priced in," the note said.
BEL itself anticipates Rs 55,000 crore in new orders for FY26 and a minimum revenue growth of 15%, alongside a 27% Ebitda margin, which is an improvement over their FY25 guidance of 23-25%.
Capital expenditure is guided at Rs 1,000 crore and R&D at Rs 1,600, with 90% of revenue expected from the defence sector. This upward revision in revenue growth, with a minimum guidance of 15-17% and 20% long-term, suggests improved visibility.
This enhanced outlook is attributed to increased exports and higher domestic demand, underpinned by their proven competitive advantage following recent combat deployments, the UBS note said.
Shares of BEL closed 0.1% higher at Rs 383.35 on the BSE on Thursday, compared to a 0.8% decline in the benchmark Sensex.
Twenty-four out of the 28 analysts tracking the company have a 'buy' rating on the stock, two recommend a 'hold' and two suggest a 'sell', according to Bloomberg data. The average of 12-month analyst price target of Rs 394 implies a potential upside of 3%.
