BEL Shares Gain 5% on Strong Q2 Results and Order Prospects

Bharat Electronics Limited (BEL), a government-owned defence electronics company, witnessed a notable increase in its stock price during Wednesday's trading session. The shares climbed nearly 5 percent, buoyed by solid quarterly performance and optimistic guidance from Motilal Oswal Financial Services (MOFSL) following BEL's September quarter (Q2FY27) earnings announcement.

The stock began the day slightly higher at ₹381.90 on the National Stock Exchange (NSE) and continued to gain momentum, reaching an intraday peak of ₹396.95. This marked the third consecutive session of gains, resulting in an approximate 7 percent rise over the last three trading days. By early afternoon, BEL was leading the gainers list on both the Sensex and Nifty 50 indices, with a 4.4 percent increase to ₹396.70 and trading volume nearing 16 million shares.

In contrast, the Nifty 50 index showed more modest growth, rising 89 points or 0.38 percent to 23,900 at the same time.

Positive Earnings Performance

MOFSL reaffirmed its 'Buy' rating on BEL shares, upgrading the target price from ₹530 to ₹540. The brokerage highlighted the company’s strong Q2 performance, which surpassed expectations across revenue, EBITDA, and net profit metrics.

BEL reported revenue of ₹73 billion for the quarter, reflecting a 26 percent year-on-year increase. EBITDA grew 20 percent to ₹20.4 billion, although margins contracted slightly by 140 basis points to 28 percent. Net profit also increased by 20 percent year-on-year, reaching ₹15.4 billion.

Order Book and Future Prospects

The company closed the quarter with an order book totaling ₹687 billion. Defence-related contracts constitute around 90 percent of this backlog, with the remainder from non-defence projects. New order inflows in Q2 amounted to ₹38 billion.

Despite this robust order book, MOFSL noted a 31 percent decline in base order inflows compared to the previous year. This reduction is attributed to a slowdown in fresh orders from the Ministry of Defence (MoD), including delays in large contracts such as the Quick Reaction Surface-to-Air Missile (QRSAM) system, valued at ₹300 billion. BEL is optimistic about receiving this significant order in an upcoming Cabinet Committee on Security (CCS) meeting.

Additionally, the company is hopeful about securing a ₹200 billion contract for next-generation corvettes in the near term.

While the brokerage acknowledged certain delays by the MoD in finalising key projects, it expects order inflows to strengthen over the forthcoming quarters as defence spending accelerates. MOFSL maintained its forecast for BEL’s financial performance, projecting compound annual growth rates (CAGR) of 15 percent in revenue, 14 percent in EBITDA, and 15 percent in net profit over the period from fiscal 2026 to 2029.

Risks and Considerations

The brokerage also outlined potential risk factors for BEL. These include possible slowdowns in order inflows from both defence and non-defence sectors, heightened competition, further delays in awarding large tenders, volatility in commodity prices, and payment delays from the MoD.

Bharat Electronics Limited plays a critical role in India's defence manufacturing ecosystem, supplying a wide range of electronic products and systems to the armed forces. Its stock performance often reflects broader trends in government defence expenditure and procurement cycles.

As the government continues to prioritize modernizing military capabilities, companies like BEL are expected to benefit from increased orders and investments. Investors will be watching closely for developments on pending contracts and the pace of new order inflows in the coming months.

Disclaimer: The views and forecasts mentioned are those of the brokerage and analysts cited, and do not represent the opinions of Business Standard. Readers should exercise their own judgment before making investment decisions.