PSU stock: Elara says accumulate BEML shares on promising order pipeline

Elara Securities has reiterated its optimistic outlook on BEML Ltd following a recent meeting with the company's management. The brokerage highlighted BEML's robust growth prospects and set an ambitious orderbook target of Rs 22,000-23,000 crore by the fiscal year 2026. The anticipated growth is attributed to the finalisation of significant orders, operating leverage, and improvements in cost optimisation.

BEML's management has provided guidance on a 20 per cent year-on-year revenue growth for FY26, driven by the seamless execution of projects like the Bengaluru Metro and Vande Bharat series. Notably, the company has nine train sets pending delivery, with a prototype having been cleared in April. These developments have prompted Elara to maintain a positive stance on the stock, reaffirming an 'Accumulate' rating.

Elara Securities has set a target price (TP) of Rs 4,860 for BEML, based on a 37 times March FY27E P/E. This aligns with the anticipated earnings CAGR of 34 per cent during FY25-28E. The firm's financial outlook for BEML includes an average ROE and ROCE of 16 per cent each during FY26-28E, bolstered by a promising order pipeline and robust orderbook guidance.

Further supporting the projections, BEML expects its order inflow to double by FY26, from FY25's Rs 6,800 crore, which was a 28 per cent increase year-on-year. This growth is underpinned by major metro projects in cities such as Chennai, Mumbai, and Pune, as well as the expansion of metro lines in other regions. The company is also eyeing Regional Rapid Transit orders and high-speed train tenders by December 2026.

The company anticipates its orderbook mix to be in the ratio of 20:20:60 for mining, defence, and rail sectors, respectively, by FY26. This diversification is expected to be supported by various tenders in the rail and defence segments, with emergency defence procurement orders potentially materialising soon.

BEML is also planning significant capital expenditure (capex) to meet demand, with an Rs 1,800 crore expansion plan for the Bhopal plant across five phases. The first phase alone will require approximately Rs 220 crore. The Bhopal plant is expected to reach a peak capacity of 450 cars, with 150 units to be produced annually. Capex guidance for FY26 is set at Rs 600 crore, with similar levels projected for FY27.

Elara Securities remains confident in BEML's potential, reiterating its 'Accumulate' rating with an unchanged target price of Rs 4,860. The firm's outlook is supported by BEML's strategic plans and expected order inflow, which are poised to drive growth and enhance shareholder value.

Overall, BEML's strategic focus on metro and defence projects is expected to bolster its market position and financial performance in the coming years. The company's efforts in cost optimisation and leveraging operating efficiencies are key to achieving its ambitious targets. Additionally, the proactive approach to expanding its capacity and securing new orders solidifies its growth trajectory.