Bharat Dynamics: Defence stock BDL gets 36% target revision by Nuvama post doubling of Q4 sales

Nuvama Institutional Equities has upped its target price on defence stock Bharat Dynamics Ltd (BDL) by 36 per cent after the Hyderabad-based PSU reported doubling of Q4 sales. With a robust backlog of Rs 22,800 crore at FY25-end, Nuvama said BDL is well-positioned to achieve a revenue growth of over 60 per cent  compounded annually over FY25–27. 

BDL is India’s leading manufacturer of SAMs, air-to-air missiles (AAMs), torpedoes and ATGMs and it is now evolving into providing turnkey solutions to the Indian Armed Forces. 

Although the company previously encountered supply chain disruptions due to its dependence on war-affected nations such as Russia and Israel, Nuvama believes these challenges have now eased out. 

"In this regard, going forward sustained/improved execution momentum along with levelling up of current OPM levels shall be key triggers for the company," it said.

On Wednesday, the stock fell 5.21 per cent to hit a low of Rs 1,857.60. The defence player reported a 5.5 per cent YoY fall in net profit at Rs 272.80 crore for the March quarter on 108 per cent YoY increase in revenue at Rs 1,777 crore. Ebitda was down 5.5 per cent YoY to Rs 299 crore, while margins fell sharply to 16.83 per cent. 

On BDL's Q4 results, Nuvama said a strong top line growth of 108 per cent YoY extended strength into next year. Order inflows for FY25 came in at Rs 6,700 crore, increasing the Bharat Dynamics backlog to Rs 22,800 crore (7 times FY25 sales), providing strong revenue visibility over the next three–four years.

However key growth catalyst hereon shall be timely execution, it said while retaining ‘Buy’, as it baked in a 60 per cent revenue CAGR over FY25–27 along with 22–23 per cent operating profit margin, factoring in benefits of backward integration and easing of supply-crunched critical imports (chips and warheads), which had plagued execution so far. 

"We are revising FY27E EPS by 6 per cent as we assign 45 times (earlier 35 times) on FY27E EPS of Rs 50.10, yielding a target price of Rs 2,250 (earlier Rs 1,650)," it said.

Meanwhile, an interim dividend of Rs 4 per share was paid during the year. and the BDL board has now recommended a final dividend of Re 0.65 per share for the year totalling to Rs 4.65 per share. "The CFO came in at Rs 167 crore, plunging 59.3 per cent YoY due to a build-up in working capital while C&CE remained flattish at Rs 4,200 crore for FY25," Nuvama said.