The big upgrade this morning. Motilal Oswal has upgraded its rating on Bharat Dynamics to Buy from Neutral, as they believe the valuations are turning reasonable. The target price is, however, unchanged at Rs 1,900, implying 28% upside from current levels for the Bharat Dynamics share price. It is among the key gainers among the list of defence sector stocks today.
According to the calculations by Motilal Oswal, the stock currently trades at 28.6x P/E on FY28 estimates. They are maintaining these estimates and “expect execution and margins to scale up in the coming quarters.” They pointed out that the stock has corrected 25% since they initiated coverage in July and “thus upgrade the stock to Buy from Neutral.”
Motilal Oswal on Bharat Dynamics: Focus on margin improvement
The leading domestic brokerage house explained that BDL’s ongoing initiatives are “strategically aligned to enhance profitability and improve margins.” The establishment of its integrated radio frequency (RF) 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. At the same time, its capacity expansion for manufacturing surface-to-air missiles (SAMs), next-generation missiles, VSHORAD rockets, and propellants for anti-tank guided missiles (ATGMs) allows “BDL to capture higher volumes and achieve better economies of scale. Over time, the company has also significantly lowered the share of imported raw materials and advanced indigenization efforts, with several platforms now achieving 80-90% local content,” added Motilal Oswal.
They believe this combination of import substitution, higher in-house manufacturing, and scale efficiencies is expected to reduce input costs, improve supply chain control, and ultimately support sustained margin expansion for Bharat Dynamics.
Motilal Oswal on Bharat Dynamics: Export focus to support
“BDL is well placed to benefit from the wave of global developments aimed at boosting defence trade,” Motilal Oswalpointed out. NATO’s recent decision to raise member nations’ defence spending to 5% of GDP by CY35 is expected to open up significant opportunities for suppliers that can deliver reliable and cost-effective solutions.
According to Motilal Oswal, this comes at a time when India’s defence exports have already hit a record Rs 23,600 crore in FY25, up 12% YoY, and are expected to double in the next 2-3 years.
Among its peers, “BDL has been much faster in grabbing the export opportunities, with its export revenue surging to Rs 1200 crore in FY25 from Rs 160 crore in FY24,” they added. BDL has already secured export contracts from several allied nations, and by aligning its products and capabilities with the needs.