BEL's strong Q3, promising outlook lead brokerages to issue 'Buy' call

State-owned aerospace and defence company Bharat Electronics Limited (BEL) delivered a robust Q3FY25 results, reporting a 52.5 per cent year-on-year (Y-o-Y) growth in consolidated profit at Rs 1,311 crore, up from Rs 859.6 crore in Q3FY24, driven by strong operational performance and a healthy order book.

Among the top highlights of BEL’s Q3FY25 performance include a 39 per cent Y-o-Y growth in execution and a 330 basis points (bps) expansion in Ebitda margin/operating profit margin (OPM) to 28.9 per cent, surpassing analyst expectations.

Despite slower order inflows during the first nine months of FY25, the company remains optimistic about meeting its FY25 order intake target of over Rs 25,000 crore, backed by a solid order book of Rs 71,100 crore and a pipeline exceeding Rs 1 lakh crore.

Thus, analysts are positive on BEL, with major brokerages including Nomura, Nuvama, Jefferies, Motilal Oswal and Macquarie all maintaining a ‘Buy’ rating. They cite the company’s strong execution, momentum in orders, and solid margin outlook as key reasons behind this rating.

Nomura said that Q3FY25 revenue growth exceeded their expectations. Ebitda margin stood at 28.7 per cent, driven by healthy operating leverage. They stressed upon a bullish ordering outlook, anticipating orders across multiple defence sectors.

Key future orders include Rs 15,000 crore annually from base order inflows (including AMC/spare contracts), Rs 25,000-30,000 crore for the Quick Reaction Surface-to-Air Missile (QRSAM) system in FY26, Rs 15,000 crore for the Medium Range Surface-to-Air Missile (MRSAM) and MFSTAR radar system for next-generation corvettes in FY27, and Rs 8,000-10,000 crore for radars, electronic warfare, communications, and missile systems between FY25 and FY27. Thus, Nomura forecasts total order inflows of Rs 85,000 crore for BEL over FY25-FY27.

Considering these factors, Nomura raised its FY25 Ebitda margin and EPS estimates by around 200 bps and 8 per cent, respectively. They expect BEL’s gross margin to remain in the 46-48 per cent range, supported by improved localisation and cost efficiencies. Nomura reaffirmed its ‘Buy’ rating, with a target price of Rs 363, based on a 42x multiple of the September 2026 EPS.

Nuvama analysts, too, raised their earnings per share (EPS) estimates for FY25, FY26, and FY27 by 11 per cent, 4 per cent, and 2 per cent, respectively, resulting in a revised target price of Rs 350 (up from Rs 345). They highlighted BEL’s hefty order book, which is 3.5x its FY24 sales, and the company’s continued focus on higher localisation and cost efficiencies that are expected to bolster earnings.

Overall, BEL’s revenue surged 39 per cent Y-o-Y to Rs 5,770.7 crore in Q3FY25, up from Rs 4,162.2 crore in Q3FY24. The company’s operational performance stood out, with Ebitda climbing 55.7 per cent annually to Rs 1,669.5 crore in Q3FY25, from Rs 1,072.5 crore in Q3FY24.

Motilal Oswal analysts said BEL’s Q3FY25 results exceeded estimates. The company is expected to benefit from defence electronics opportunities, including large orders for QRSAM, MRSAM, next-gen corvettes, P75/P75I defence electronics, and Kavach-related contracts from FY26 onwards. Revenue is projected to grow at a 19 per cent CAGR from FY24-27, driven by market share gains and indigenised offerings. Estimates are slightly trimmed for lower other income, analysts said. The target price remains Rs 360, with a ‘Buy’ rating maintained, valuing BEL at 35x two-year forward earnings.

According to reports, Jefferies, too, maintained a ‘Buy’ rating on BEL with a target price of Rs 370, citing a 51 per cent beat in Q3 Ebitda and a positive margin outlook. Meanwhile, Macquarie continued with an ‘Outperform’ rating and a target price of Rs 350, highlighting the company’s strong order pipeline, with potential orders ranging from Rs 25,000 crore to Rs 50,000 crore lined up for FY26.

Lastly, BEL's solid performance, strong execution, and healthy order book have boosted positive sentiment from analysts, making the company a top pick in the sector for many brokerage firms.