The Bharat Eelectronics (BEL) share price has delivered over 40% return in 2025 so far. In fact, it has risen 2.25% in the last one month and 34% in the past six months. Over the last 3 years, it has been a multibagger counter delivering returns of 289%. Given the run-up in defence sector stocks, is it a Buy still after its Q2 results? JM Financial has downgraded BEL to an ‘Add’ from ‘Buy’, citing the recent run-up in the stock price.
However, the good news is that the brokerage house raised the target price to Rs 470 from Rs 425, which implies an upside of 10.3% from the current market price. They see supply chain disruption and delay in ordering activity as key risks going forward.
JM Financial on BEL: Valuation concerns
JM Financial highlighted that BEL sustained a steady margin profile, healthy order prospects, and increasing business opportunities from the Indian Navy. Additionally, the company has seen continuous focus on diversification and export markets, capacity expansion, and an indigenisation push by the central government. However, “the current valuation has factored in all the positives for the stock and hence we downgrade the stock to ‘ADD’ from ‘Buy’.”
They expect the revenue and profit to grow at 16%/15% over FY25-FY28. At the revised target price, they are valuing the company at 46x September 2026 earnings.
JM Financial on BEL: Earnings ahead of estimates
Bharat Electronics reported a better-than-expected performance in Q2 FY26 on all fronts and surprised positively on EBITDA margin. However, all of this is already reflected in the stock price, resulting in a high valuation.
The company’s revenue at Rs 5,760 crore was 7% and EBITDA margin was 29.4%, ahead of JM Financial’s estimates.
Order inflow for H1 FY26 was Rs 12,500 crore, up 68.5% YoY. Order book stands at Rs 74,500 crore (3x TTM revenue). The management maintained its revenue growth guidance of 15%, with an EBITDA margin of 27% for FY26.
BEL continues to explore new growth opportunities through diversification, capability enhancement, competitiveness, modernisation and export initiatives
BEL Capex plans
Recently, BEL committed to a capex of Rs 1,400 crore in Andhra Pradesh over the next 3-4 years, to set up the Defence System Integration Complex (DSIC). This will be mainly for the execution of the QRSAM order. Going forward, other programmes related to unmanned systems, missile systems, and military radars will be manufactured in this complex.
All in all, investors need to watch out for how these capacity expansions tie in with the valuations.
