Bharat Dynamics' Neutral Rating Maintained, Price Target Set at Rs 1150

Bharat Dynamics' Execution Impacted by Delays in Missile Component Supplies

Bharat Dynamics (BDL) has reported results that were weaker than expected, primarily due to the impact of delays in the supply of radars, seekers, and other components for the Akash and Astra Mk1 missiles from external vendors. This delay has resulted in the company's execution being slower than initially anticipated.

The company is expected to book approximately INR 20-25 billion of revenues in the first half of FY27 from these orders once the supply of these components commences. To avoid further delivery delays, BDL may also consider importing certain components. Despite a healthy order book valued at approximately INR 260 billion, the overall execution is expected to remain slower than earlier estimates, with margins likely to remain under pressure due to a higher share of bought-out components.

Downgrade and Revised Target Price

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In light of these factors, we have revised our earnings estimates for FY27 and FY28 downward by 25% and 28%, respectively. We have also downgraded the stock to Neutral with a revised target price of INR 1,150, based on 42x Jun'28E EPS. This is a reduction from our earlier target price of INR 1,500. The stock is currently trading at 70.5x/48.1x/38.1x on FY27/FY28/FY29 EPS.

We believe it is prudent to await a sustained ramp-up in execution and improved supply-side visibility before revising our outlook on the company.