Global brokerage firm UBS has upgraded Bharat Electronics (BEL) to a ‘Buy’ rating from ‘Neutral’, setting a new price target of Rs 450, up from Rs 320 earlier.
But what is driving this bullish sentiment? Let’s take a closer look at why BEL is suddenly looking like a stock to watch.
UBS on BEL: A bigger order book and faster too
One of the key reasons for the upgrade is BEL’s expected surge in new orders over the next few years. According to the UBS report, the company’s order book is likely to grow at 17% CAGR (Compound annual growth rate) between FY25 and FY28, up from the earlier estimate of 8%.
UBS now expects BEL to bag Rs 1.4 lakh crore worth of new orders from a larger Rs 2.4 lakh crore pipeline during this period.
“We now prefer BHE over HNAL based on better expected earnings growth and a sharper ramp of the order book over the next three years,” the brokerage stated.
UBS on BEL: Combat-proven platforms give BEL a boost
It is not just about the size of the orders but also on what is being sold. Several of BEL’s systems such as the Akash missile system, Schilka weapons, and L70 gun upgrade have been battle tested and are now considered combat-proven.
According to the brokerage report, “Bharat Electronics could book orders/repeat orders in domestic/export markets” for these platforms, improving the visibility of future revenues.
UBS on BEL: FY26 could be a turning point
After a relatively quiet FY25, UBS believes BEL’s story really begins in FY26. The company expects to secure Rs 55,000 crore in fresh orders next fiscal year, with a minimum revenue growth of 15% and EBITDA margins likely to expand to 27%.
“We estimate Rs1.4 trillion of orders… given improved visibility and traction for large platforms like the QRSAM, Akash NG, radars and electronic warfare suites,” the report notes.
UBS on BEL: Better margins, higher valuation
BEL’s earnings for FY26 and FY27 have already been upgraded by over 12% over the last two years. UBS has now revised BEL’s valuation to 45x 12-month forward P/E from 38x earlier.
The brokerage noted, “We highlight multiple near-term drivers: a sharp order book ramp, accelerating margin-accretive topline and upside risk for consensus estimates due to recent favourable developments.”
As per UBS report, for FY26, the company has guided for Rs 10,000 crore in capex and Rs 16,000 crore for R&D, with 90% of revenues coming from defence-related projects.
Potential orders on the horizon include next-gen corvettes, QRSAM systems, and components for the Shakti electronic warfare system. Longer term, BEL is eyeing large defence sectors projects like Project Kusha, Akash, and software-defined radios (SDRs).