Shares of Bharat Dynamics Ltd (BDL) have fallen 45 per cent from their 52-week high level, but analysts are mixed over the defence PSU stock's return prospects. The ongoing Russia-Ukraine war and conflicts in the Middle East region continued to affect supply chain issues, leading to delays in receipt of inputs, which impacted BDL's performance in the September quarter. The company expects most of these issues to be resolved by H2FY25.
BDL's healthy order book does not correlate with adequate execution, said Nirmal Bang Institutional Equities.
The brokerage said while its forecast for FY25 remains largely unchanged there are several concerns over the medium term which have led to cuts in FY26 forecasts.
"Our key concerns are (a) BDL’s platform operates on a TOT basis with Russia, presently engaged in conflict with Ukraine and thus ongoing supply chain issues will likely persist in the short to mid-term; and (b) revenue recognition could experience delays due to the extended time required to execute platforms (from components/systems/subsystems imported from Russia)," it said.
On Friday, shares of BDL closed at Rs 989.80, up 1.04 per cent. The scrip is down 44.84 per cent from its 52-week high of Rs 1,794.70 hit on July 5. This brokerage has revised down its FY26 projections for revenue, Ebitda, and PAT by 26 per cent, 11 per cent, and 10 per cent, respectively.
"The process of testing, obtaining approvals, and the final delivery by the customer may further exacerbate our concerns. We are, therefore, reducing our target multiple to correspond with the 5-year average of 26x EPS, down from 43x. The stock is trading 31.5x FY26 EPS. We maintain HOLD on the stock, arriving at a target price of Rs 970," Nirmal Bang said.
Choice Broking has a positive view on BDL. It noted that Bharat Dynamics is the sole supplier of offensive, as well as defensive systems domestically. The upcoming big-ticket project is in the pipeline and it is expected to materialise from H2FY25 onwards, the brokerage said.
Choice Broking talked about the increasing exports opportunity with 4-5 friendly countries and BDL's diversified product portfolio across armed forces.
"We expect BDL to register a healthy revenue/Ebitda/PAT growth of 28 per cent/31 per cent/24 per cent CAGR over FY24-27E. We ascribe a multiple of 45x on FY27E EPS to arrive at a TP of Rs 1445 with a rating of “BUY”," it said.