Strong order visibility, rich valuations divide analysts on BEL post Q3

While analysts acknowledge Bharat Electronics' strong operational performance, healthy order inflows, and strategic initiatives, concerns over valuations have led to divergent recommendations

Brokerages remain divided in their views on the state-owned defence major Bharat Electronics (BEL) after the Navratna PSU announced its financial results for the third quarter of FY26 (Q3FY26).   Analysts at Choice Institutional Equities have reiterated their Buy rating on the stock, citing a system-integration-led re-rating and multiple order optionalities as key upside drivers. In contrast, global brokerage firm Nomura has maintained a Neutral stance, pointing to rich valuations, despite a marginal upgrade to its earnings estimates and target price.

 

That said, brokerages broadly agree that the company continues to demonstrate strong execution momentum, healthy order inflows and clear revenue visibility, with management well placed to achieve its FY26 order intake guidance.

 

The brokerage commentary follows BEL’s announcement of a 20.8 per cent year-on-year rise in net profit to ₹1,590 crore in Q3FY26, compared with ₹1,316 crore in the year-ago period. Revenue increased 23.7 per cent year-on-year to ₹7,122 crore, from ₹5,756 crore in Q3FY25. Earnings before interest, tax, depreciation and amortisation (Ebitda) stood at ₹2,117 crore, reflecting a 28 per cent year-on-year increase from ₹1,653 crore.

Choice Institutional Equities on BEL | Buy | Target price: ₹550

Analysts at Choice have retained their Buy rating on the defence stock with a target price of ₹550 per share, stating that the Q3 management commentary reinforces confidence that BEL is in a favourable position, backed by strong execution, accelerating order momentum and improving strategic depth.  The brokerage noted that the reported numbers were solid and meaningfully ahead of Street expectations, driven by system-level ownership rather than component supply. BEL’s order book stood at ₹73,500 crore, around 3.1 times FY25 revenue, providing clear three-year revenue visibility.  Management’s guidance of over ₹27,000 crore in order inflows for FY26, analysts believe, appears conservatively framed, with multiple large programmes now in advanced stages.  ALSO READ | Maruti Suzuki Q3 hit by costs as volume push keeps margin pressure alive 

“We see near-term optionality from (1) NGC orders of ₹3,000–5,000 crore in Q4, with a further ₹10,000–12,000 crore spillover into H1 FY27, (2) LCA (Tejas) electronics orders of ₹2,400 crore, and (3) EW programmes such as Satrugat and Samagat, where trial resolution materially improves award probability over the next 6–9 months,” wrote Putta Ravi Kumar and Ashutosh Bagaria, analysts at Choice, in a report.

 

BEL’s strategic shift from a supplier to a system-level integrator, analysts believe, remains the key re-rating driver. Leadership roles in programmes such as QRSAM (₹30,000–32,000 crore) and Project Kusha enhance execution stickiness, pricing power and lifecycle revenues. 

 

"Rising indigenisation levels, currently at around 70–75 per cent, along with proactive semiconductor redesign, are helping de-risk supply chains and protect margins. Sustained R&D investment of over ₹1,700, up 20 per cent year-on-year, supports relevance across AI-led, electronic warfare-centric and network-centric warfare," said the brokerage.

Nomura on BEL | Neutral | Target price: ₹454

Analysts Umesh Raut and Aritra Banerjee of Nomura have retained their Neutral rating on BEL citing the rich valuations. The analysts, however, have raised the target price to ₹454 per share from ₹427, citing the company’s strong position to achieve management’s FY26 estimated order intake guidance of ₹27,000 crore, having already achieved 71 per cent of the target in YTDFY26.

 

Nomura said management maintained its FY26 guidance across parameters. While sales estimates were largely unchanged, earnings were raised by 2–3 per cent to account for better operating leverage.  ALSO READ | TVS Motor Company shares gain 4% on Q3 results; check key highlights inside 

“Our FY27–28F sales estimates are 4–6 per cent lower than consensus, as large orders such as QRSAM are likely to see higher back-ended execution,” Nomura said. The brokerage forecast a PAT CAGR of 14 per cent over FY26F–28F, compared with a 27 per cent CAGR over FY22–26F.

 

“We reaffirm Neutral due to rich valuations. The stock trades at 49 times FY27F earnings versus a one-year forward average P/E of 32 times. We roll forward our valuation and continue to value the stock at 42 times Mar’28F EPS, in line with +1 standard deviation given strong ordering prospects, arriving at a target price of ₹454,” wrote the analyts in a report.  ============================= 

(Disclaimer: The views and investment tips expressed by the analysts in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.)