Bharat Dynamics Shares Upgraded To 'Buy' By Motilal Oswal Post Q1 Results On Reasonable Valuation
Motilal Oswal expecs Bharat Dynamics to benefit from a strong prospect pipeline of nearly Rs 500 billion and an emergency procurement program.
Bharat Dynamics’ ongoing initiatives are strategically aligned to enhance profitability and improve margins. The establishment of its integrated radio frequency seeker facility at its Kanchanbagh Unit enables in-house production and testing of RF seekers, reducing dependence on costly imports and strengthening value addition within the company.
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Motilal Oswal Report
Bharat Dynamics Ltd. delivered strong 30% YoY growth in execution in Q1 FY26 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 YoY. PAT performance was ahead of the consensus estimates.
With a strong order book of nearly Rs 233 billion, we expect execution to scale up further in the coming quarters, particularly from Akash, Astra Mk1, MRSAM and armament projects.
We expect Bharat Dynamics to benefit from a strong prospect pipeline of nearly Rs 500 billion and an emergency procurement program.
We had initiated coverage on Bharat Dynamics in Jul’25 with Neutral recommendation due to high valuations of 52x/38x FY27E/FY28E EPS then. Since then, the stock has come down by 25% 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 Rs 1,900, based on 42x Sep’27E EPS.
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