the recent surge in Bharat Electronics Ltd (BEL) shares and what it means for investors:
Stock Performance and Market Reaction
BEL shares jumped over 4% in Tuesday’s trading session, continuing a strong rally fueled by positive quarterly results and optimism around defence sector prospects. Over the past month, the stock has surged more than 26%, reflecting strong investor confidence despite some shortfall in FY25 order inflows.
Q4 Results Highlight Strong Operating Margins
BEL reported an impressive operating margin of 30.6% for the March quarter, significantly beating the market consensus of 24.7%. Adjusted PAT was Rs 2,100 crore—18% higher year-on-year and 20% above expectations. Revenue of Rs 9,120 crore also beat forecasts by 3%. This robust margin and earnings surprise have helped fuel the recent price rally.
Valuation: Expensive But Justified?
The stock currently trades at a forward P/E of 43.9x, well above its historical average of 21x. While this suggests a premium valuation, most analysts argue it is justified due to:
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Strong fundamentals and consistent execution
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Expanding operating margins
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A large, high-quality order book worth Rs 71,700 crore, with 40% tied to strategic programmes like Akashteer (90% indigenous content)
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Potential for emergency procurement orders amid geopolitical tensions
Brokerage Views and Price Targets
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Nomura: Maintains a ‘Buy’ rating but more conservative target of Rs 363.
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Nuvama Institutional Equities: Calls BEL a top sector pick; raises FY26 EPS by 4% and target price to Rs 430 (from Rs 385), assigning a 45x multiple.
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Motilal Oswal: Increases target to Rs 410 (from Rs 360), citing strong execution and healthy margins.
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Antique Stock Broking: Upgrades FY26 earnings by 8%, values stock at 45x FY27 earnings with a target of Rs 422.
Investment Takeaway
Despite the rich valuation, the consensus remains bullish due to BEL’s growing role in India’s defence manufacturing push, margin improvement, and robust order backlog. The stock may have priced in some near-term upside, so investors looking for entry points might consider accumulating on dips.
For those with a longer horizon, BEL remains a compelling story given strong government defence spending, localisation trends, and margin tailwinds. Holding existing positions or adding gradually could be prudent strategies.
