Sell Bharat Dynamics stock; 25% downside ahead, warns Elara Securities

Despite upping its target price on Bharat Dynamics Ltd (BDL), Elara Securities projected a 25 per cent downside on the defence PSU stock, saying all positives are already factored in. Expecting BDL's margin to be flat going ahead, the brokerage advised investors to 'Sell' the stock with a target price of Rs 1,480.
On Wednesday, BDL shares were trading at Rs 1,963, down 0.88 per cent. Elara's target suggests a 25 per cent downside over this price. 

The brokerage said BDL's Ebitda margin is likely to be in the range of 16-18 per cent during FY26-27E as missile systems are largely indigenized. 

Revenue CAGR may grow by 30 per cent-plus over FY25-27E, driven by strong execution of Rs 22,100 crore orderbook as on March 2025, it said adding that the recent conflict highlighted product quality and combat mettle of BDL’s product portfolio and would open various exports opportunities. 

"We raise our target to Rs 1,480 on 40 times June FY27E P/E. However, we downgrade to 'Sell' on 400-600 bps lower-than-estimated margin as the current price already factors in all the positives, and it has outperformed the Nifty by 43 per cent in the past three months vs the Index at 8 per cent," Elara said.

During the recent conflict between India and Pakistan, the 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, Elara said. 

This, the brokerage said, 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.

Elara said it lowered its FY26E EPS by 17 per cent and FY27E EPS by 8 per cent on Akash missile execution from FY26 against its assumption in FY25, lower-than-expected margin in FY25 with likely less scope for further improvement. 

It said the current price of BDL already factors in all the positives. 

"We expect an earnings CAGR of 46 per cent during FY25-28E with an average ROE of 24 per cent 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," it said.