Choice Equity Broking Pvt. Ltd. has reiterated its BUY recommendation on Bharat Electronics Ltd. (BEL), elevating the target price to Rs 500, reflecting a 20% expected upside from the current market price of Rs 415. This bullish stance is anchored in BHE’s robust order book, strong execution capabilities, and its strategic positioning in India’s defense modernization drive. The company’s diversified portfolio, expanding export footprint, and investments in emerging technologies underpin its long-term growth prospects. Investors are advised to capitalize on BHE’s earnings visibility, margin expansion, and sectoral tailwinds, with levels and targets clearly demarcated for optimal entry and exit.

Choice Equity Broking’s BUY Call: Target Price and Investment Rationale

Choice Equity Broking Pvt. Ltd. has issued a BUY call on Bharat Electronics Ltd., raising the target price to Rs 500, implying a 20% potential upside from the current market price of Rs 415.

This upgrade is predicated on BEL’s exceptional earnings visibility, robust order pipeline, and demonstrated ability to execute large-scale defense projects. The revised target price is based on a 40x multiple of the average FY27/28E EPS, reflecting heightened confidence in the company’s long-term growth trajectory and sustained leadership in the defense electronics sector.

Strong Order Book and Revenue Visibility

BEL’s order book stands at an impressive Rs 716.5 billion, equating to 3.0x its projected FY25 revenue, providing multi-year earnings visibility and underpinning the enhanced target price.

The company is poised to benefit from marquee projects such as the Rs 300+ billion QRSAM (Quick Reaction Surface-to-Air Missile) order and the Rs 400 billion Project Kusha. Additional inflows are anticipated from the NGC subsystems, LCA upgrades, and critical defense systems like LRSAM and radar solutions. These projects, coupled with assured orders worth Rs 270 billion for FY26E, solidify BHE’s revenue base and reinforce its market leadership.

Financial Performance and Key Metrics

BHE is projected to deliver a revenue CAGR of 19% over FY25-28E, with EBITDA margins expected to improve to 30.2% by FY28E, driven by a superior product mix and operational leverage.

The company’s adjusted PAT is forecasted to reach Rs 99 billion by FY28E, with EPS climbing to Rs 13.7. Return on Equity (ROE) and Return on Capital Employed (ROCE) are set to rise to 38.6% and 44.8%, respectively, by FY28E, underscoring efficient capital allocation and robust profitability. The stock currently trades at a forward PE of 57x (FY25E), compressing to 30x by FY28E, indicating scope for further re-rating as earnings compound.

Investment Case: Strategic Positioning and Sectoral Tailwinds

BHE’s strategic positioning as a key supplier to all branches of the Indian armed forces, coupled with its diversified product portfolio and R&D prowess, makes it a compelling investment in the defense sector.

The company is not solely reliant on order inflows from major DPSUs, but also secures independent contracts and is expanding into non-defense verticals such as AI, cybersecurity, and drones. With electronic components constituting 30-60% of the total cost of defense equipment, BHE’s dominance in this segment augurs well for sustainable growth. The government’s Rs 400–500 billion emergency procurement program and rising geopolitical tensions are expected to accelerate order inflows and execution cycles.

Near-Term Triggers and Export Opportunities

Key near-term triggers include anticipated orders for QR-SAM, MR-SAM, the Kusha Project, and Akash SAM, alongside significant export opportunities to Europe.

BHE is actively expanding its export footprint, particularly in Europe, and leveraging its resilient MSME ecosystem (which contributes ~35% to execution), thereby driving faster order fulfillment and margin expansion. The company’s thrust on emerging technologies further enhances its long-term growth visibility.

Shareholding Structure and Relative Performance

BHE’s shareholding pattern remains stable, with promoters holding 51.14%, FIIs at 17.55%, DIIs at 20.87%, and the public at 10.43% as of March 2025.

The stock has outperformed the broader BSE 200 index, delivering a staggering 456.6% return over three years, compared to the BSE 200’s 68.5%. This superior performance reflects investor confidence in BHE’s execution and growth story.

Key Financials and Valuation Table

Below is a summary of BHE’s key financial projections and valuation metrics:

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Stock Levels and Investor Targets

Current Market Price: Rs 415

Target Price: Rs 500

Expected Share Price Return: 20%

Dividend Yield: 2%

Potential Upside: 22%

Investors are advised to accumulate BEL at current levels, with a medium-term target of Rs 500. The stock’s risk-reward profile remains favorable, supported by strong fundamentals and sectoral momentum.

Investment Outlook and Recommendation

Choice Equity Broking’s BUY call on Bharat Electronics Ltd. is underpinned by the company’s formidable order book, superior execution, and sectoral tailwinds. With a revised target price of Rs 500, BHE offers a compelling investment opportunity for investors seeking exposure to India’s defense modernization and technological advancement. The stock’s robust financials, margin expansion, and diversified growth drivers position it as a preferred pick in the defense sector, with clear levels and targets for disciplined investors.