What's firing up Bharat Dynamics? 8 reasons behind MOFSL's positive view

MOFSL on Bharat Dynamics: Ammunition and missile systems manufacturers Bharat Dynamics Limited (BDL) shares were in focus on Thursday, July 10, 2025 after Motilal Oswal Financial Services (MOFSL) initiated coverage on the stock.

 

On the bourses, however, Bharat Dynamics’ share price fell 2.53 per cent to an intraday low of ₹1,934.80.

 

Around 9:50 AM, the Bharat Dynamics share was trading 1.60 per cent lower at ₹1,953.30 per share, while the benchmark BSE Sensex was down 0.12 per cent at 83,434.31 levels.

 

MOFSL today initiated coverage on Bharat Dynamics with a ‘Neutral’ rating and a target price of ₹1,900, indicating a downside of 4 per cent from current levels. 

 

 

“The stock currently trades at 70x/52x/38x P/E on FY26/27/FY28 estimates. We initiate coverage on the stock with a ‘Neutral’ rating and a target price (TP) of ₹1,900 based on 42x September’27E P/E,” Teena Virmani and Prerit Jain, research analysts at MOFSL said, in a note dated July 10.

 

Motilal Oswal analysts said that they like Bharat Dynamics’ business model and strong growth potential but would prefer lower entry points given current valuations. They also flagged risks including any potential cut or reprioritisation in India’s defence budget, contract cancellations or failures, changing procurement rules, and supply chain disruptions.

 

Meanwhile, here are the 8 key reasons behind MOFSL’s coverage initiation:

 

Rising global spend boosts Indian defence

 

According to MOFSL, NATO’s recent commitment to raise defence spending to 5 per cent of GDP by CY35 has strengthened the outlook for global defence players, with indirect positive implications for India. This, analysts believe, could lead to India boosting its own defence budget and create new export opportunities for domestic players. 

 

Additionally, India’s own emergency procurement drive and the Defence Acquisition Council’s (DAC) recent approvals worth ₹1 trillion are expected to considerably expand the addressable market for companies like BDL.

 

Positive industry tailwinds

 

The company’s estimated addressable market size is around ₹50,000 crore, driven by missile procurements across platforms including submarines (Project 75I), fighter jets (LCA Tejas Mk1A, Su-30MKI), and helicopters (LCH Prachand, ALH Dhruv). Continued demand for systems like QRSAM, MRSAM, NAG, and VSHORAD, alongside existing long-term contracts for high-value imports like S-400 and Barak-8, analysts highlighted, are expected to fuel growth. Export demand, especially for Akash missile systems, will also support order inflow.

 

Emerging as a leading integrator of missile platforms

 

MOFSL said Bharat Dynamics has transformed from a missile manufacturer into an end-to-end weapon systems integrator for the Army, Navy, and Air Force. It is expanding into drone-delivered payloads, guided bombs, warhead and engine manufacturing, and other segments such as mines and propellants. 

 

The company is actively exploring new partnerships with foreign original equipment manufacturers (OEMs) and continues to work closely with DRDO on a range of high-impact defence programs.

 

Strong order book, easing supply chain issues to scale up revenue

 

As of FY25-end, the missile maker’s order book stood at ₹22,700 crore, registering a healthy compound annual growth rate (CAGR) of 27 per cent over FY20–24, driven by large deals related to Akash, Konkur, and exports. While supply chain bottlenecks due to the Russia-Ukraine conflict and regional geopolitical tensions in Israel had earlier impacted revenue conversion, MOFSL noted that these issues have begun to ease. With execution expected to normalise, the company is now projected to deliver a 35 per cent revenue CAGR over FY25–28.

 

Focus on indigenisation

 

Bharat Dynamics has been consistently localising its platforms, with import dependence falling majorly over the years. The company now achieves 80–90 per cent indigenisation on several missile systems, which boosts its ability to compete independently in domestic tenders. As a key development partner to DRDO for about 40 projects, BDL is well-positioned to capitalise on indigenous defence production as more projects move into the manufacturing phase.

 

Continuous capacity growth, research efforts to minimise reliance on imports

 

The company has expanded its in-house production capabilities with new facilities like the integrated Radio Frequency Seeker Unit at Kanchanbagh, aimed at producing and testing critical missile components. It is also increasing its capacity to manufacture next-gen SAMs, VSHORAD rockets, ATGM propellants, and more. R&D spending has risen sharply over the past two years, with ongoing efforts in both new product development and upgrading legacy systems to meet emerging operational requirements.

 

Boosting exports

 

BDL’s export momentum has picked up sharply following government approvals for Akash system exports to nine countries. Export revenues rose to ₹1,200 crore in FY25 from ₹160 crore in FY24. The company’s growing global portfolio includes Akash (SAM), Astra (Air-to-Air), Helina (Air-to-Surface), anti-airfield weapons, various torpedoes, and anti-tank missiles such as Konkurs-M and Milan-2T. Lightweight torpedoes have already been exported, and other products are seeing increasing interest globally.

 

Strong financial outlook

 

MOFSL projects a 35 per cent revenue CAGR and 51 per cent PAT CAGR for BDL over FY25–28, driven by improved execution and easing supply chain hurdles.Ebitda margins are expected to strengthen from 23.8 per cent in FY26 to 25.5 per cent by FY28, aided by indigenisation and lower provisioning. 

 

With a steady capex of ₹200–300 crore annually and efficient working capital management, the company’s return on equity (RoE) and return on capital employed (RoCE) are projected to rise to 25.2 per cent and 25.6 per cent, respectively, by FY28.