A zero-debt defence PSU stock has received a 'SELL' rating, as the expert believes the company's margins are likely to be flat during FY26-27E as missile systems are largely indigenized. It is neither Bharat Electronics (BEL) nor Hindustan Aeronautics (HAL) but a midcap stock Bharat Dynamics (BDL). This defence stock has gained extraordinarily in 2025 so far, with YTD returns to the tune of 74% on BSE.
Bharat Dynamics (BDL) Share Price:
On July 2nd, BDL share price stood at Rs 1974.95 apiece, down marginally by 0.3% on BSE with a market cap of Rs 72,394.26 crore. However, the stock is nearing its 52-week high of Rs 2,096 apiece, while it has more than doubled from its 52-week low of Rs 897.15 apiece.
In the past five sessions, BDL has gained by 6.9% at least on BSE. In six months, the stock zoomed by nearly 73%. While year-to-date, the stock rallied by 74.20%.
Bharat Dynamics SELL Rating:
In its research note, Elara Capital said, Bharat Dynamics (BDL IN) EBITDA margin is likely to be in the range of 16-18% during FY26-27E as missile systems are largely indigenized. Revenue CAGR may grow by 30%+ during FY25-27E (our est. CAGR of 39%), driven by strong execution of INR 221bn orderbook as on March 2025. The recent conflict highlighted product quality and combat mettle of BDL's product portfolio and would open various exports opportunities.
During the recent conflict between India and Pakistan, Elara's note pointed out that BDL's product portfolio played a key role on both the defense and offensive fronts, with its Akash air defense missile system and the MRSAM being one of the most important lines of defense. This has opened new exports opportunities with various countries showing interest in products, as they have proven their mettle in battle.
This will bolster an already robust order pipeline in the upcoming years. The large quick reaction surface to air missile (QRSAM) tender is also expected in Q4FY26, it said.
On the valuation, Elara's note added, "We lower our FY26E EPS by 17% and FY27E EPS by 8% on Akash missile execution from FY26 vs our assumption in FY25, lower-than-expected margin in FY25 with likely less scope for further improvement. We introduce FY28E. We raise our TP to INR 1,480 from INR 1,360 on 40x (from 39x) June FY27E P/E."
"But we downgrade to Sell from Accumulate, as the current price already factors in all the positives, 400-600bp lower EBITDA margin, and it has outperformed the Nifty by 43% in the past three months vs the Index by 8%. We expect an earnings CAGR of 46% during FY25-28E with an average ROE of 24% during FY26-28E. We are yet to factor in exports inflows as there is uncertainty on the order finalization timeframe, and this would be a catalyst to monitor," Elara's note added.
Bharat Dynamics (BDL) Corporate Actions:
Although BDL has never issued bonus shares as of now, it holds healthy record of dividends payout. The stock also turned ex-split last year. In about 14 months, BDL has delivered 1:2 stock split and Rs 13.7 dividend.
Stock Split: On May 24 last year, the stock turned ex-split in the ratio of 1:2, meaning, the face value of Rs 10 was trimmed to Rs 5.
Dividends: BDL has also paid an interim dividend of Rs 8.85 per share and final dividend of Rs 0.85 per share for FY25 last year. In February this year, BDL turned ex-dividend for an interim dividend of Rs 4 per share. Together, the company delivered about Rs 13.7 dividend per share from April 2024 to February 2025.
Going ahead, BDL will in focus for its Q1 results for FY26. Also, investors will eye dividend announcement as well.
About Bharat Dynamics (BDL):
Headquartered in Hyderabad, Bharat Dynamics Limited (BDL), was incorporated on 16 July, 1970 as a Public Sector Undertaking under the Ministry of Defence, Government of India to be the manufacturing base for guided missile systems and allied equipment for the Indian Armed Forces.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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