Motilal Oswal Financial Services has initiated coverage on Bharat Dynamics Ltd (BDL) with a ‘Neutral’ rating and a price target that implies a 4% downside, citing fair valuations despite strong earnings growth visibility and robust order book dynamics.
The brokerage highlighted that it likes the company’s business model, backed by its established leadership across multiple missile platforms, including Akash, Nag, and QRSAM, and a robust order book of ₹22,700 crore, providing solid revenue visibility for the next several years. In addition, BDL is well-positioned to benefit from a strong ₹50,000 crore pipeline, including critical defense acquisitions and emergency procurements from the Indian Armed Forces.
According to Motilal Oswal’s estimates, the easing of global and domestic supply chain challenges and the upcoming large-scale defense orders could drive a revenue CAGR of 35% over FY25–28E. The company’s EBITDA margin is expected to remain healthy at around 24–26%, supported by its growing focus on indigenization and backward integration—two themes strongly aligned with the government’s Atmanirbhar Bharat initiative.
As a result, the brokerage forecasts a sharp 64% CAGR in EBITDA and 51% CAGR in PAT over the next three years, positioning BDL among the fastest-growing defense PSUs in India. The company’s efforts in expanding its product mix and enhancing manufacturing capabilities are also being viewed positively.
However, despite this promising growth outlook, Motilal Oswal believes the current valuations limit the near-term upside. At a price-to-earnings multiple of 70x FY26E, 52x FY27E, and 38x FY28E, the stock appears fully priced for now, especially when compared to its historical average and peers in the public-sector defense ecosystem.
“We believe BDL’s fundamentals are sound, and its strategic importance to India’s defense program is undeniable,” the note said. “But given the sharp run-up in the stock and the current multiples, we would prefer to wait for more attractive entry points to re-engage meaningfully.”
Bharat Dynamics has seen a significant rerating over the past year, buoyed by increased government orders, faster execution of backlogs, and a sharp increase in investor appetite for defense manufacturing companies. However, the broader sector is also grappling with long procurement cycles and execution risks, which could make the rally volatile.
With defense continuing to be a key pillar of India’s strategic growth story and BDL playing a pivotal role in missile system development, investors may need to be selective with timing, Motilal Oswal added.
