BEML shares jump 4% on defence order; here's price target for PSU stock

Shares of BEML Ltd climbed 4 per cent in Wednesday's trade after the PSU secured a contract worth Rs 136 crore from the Ministry of Defence for High Mobility Vehicles 8x8. Nirmal Bang sees further upside on the defence stock as the brokerage believes BEML's adoption of cohesive strategy may enhance its efficiency, noting that the PSU has healthy pipeline coupled with robust book prospects.

BEML shares jumped 4.25 per cent to Rs 4,548.70, taking its year-to-date rise to 57.44 per cent. Nirmal Bang finds the stock worth Rs 5,600. The target suggests 23 per cent upside over the prevailing market price.

BEML informed stock exchanges that it has achieved 100 per cent indigenisation across several critical platforms, including the Pontoon Bridge System, Aircraft Towing Tractor, Aircraft Weapon Loader, 50T Trailer, Wagons, BMP Transmission, and Ejector Air Cleaner Assembly.

Nirmal Bang said BEML's revenue is expected to expand at 13 per cent compounded annually from FY24 to FY27, reaching Rs 5,900 crore by FY27 with the execution of HMVs, ARVs (armored recovery vehicles), and launching pads.

Nirmal Bang said it values BEML at 26 times EV/Ebitda on December 2026 basis against a five-year median of 22 times. It said the strong valuation premium is justified by the strong order book, margin expansion and execution visibility in the Defence & Aerospace and Rail & Metro segment.

"Deliveries are planned to begin in 2HFY26. Notably, Ebitda growth is expected to accelerate, driven by efficiency improvements and increased high-margin projects such as unmanned metro coaches, Vande Bharat sleeper trains, and bullet trains, as well as launch vehicle and ground systems, rising from Rs 440 crore in FY24 to an
impressive Rs 920 crore by FY27, representing a CAGR of 27.7 per cent," it said.

This growth trend is in stark contrast to BEML’s performance wherein the revenue had been lower compared to other defence PSUs owing to lower order book and delays in execution.

"BEML's strategic focus on building rail, metro, and defence sectors, supplemented with innovation in metro and urban transportation platforms along with decentralizing operations (to improve efficiency and capability), is predicted to result in a PAT CAGR of 43.8 per cent (FY25-27E), Ebitda margins improving from 11.9 per cent in FY25E to 15.6 per cent in FY27 and PAT margins improving from 7 per cent in FY25E to 10.6 per cent in FY27," Nirmal Bang said.