Investors in Bharat Electronics Ltd (BEL) stock are a happy lot. The shares are up about 40% so far in 2025. Strong September-quarter (Q2FY26) results and healthy near-term prospects suggest the stock could continue to find support.
Robust execution lifted BEL’s Q2 revenue by 26% year-on-year to ₹5,764 crore. While the Ebitda (earnings before interest, taxes, depreciation and amortization) margin contracted nearly 90 basis points to 29.4%, it still came in ahead of analysts’ expectations. The defence electronics company has maintained its FY26 guidance of 15% revenue growth and a 27% Ebitda margin, after a solid performance in first half of the year (H1) that saw 16% revenue growth and a 28.8% margin.
The company’s Q2FY26 order book stands at ₹74,500 crore, which while flattish year-on-year, offers strong visibility as it is three times trailing twelve months revenue. Q2 order inflows jumped a whopping 117% year-on-year to ₹5,360 crore.
Some investors may still worry about the order book plateauing. But as Motilal Oswal Financial Services noted, “Concerns over BEL’s plateauing order book seem unwarranted as despite order book growing at a CAGR (compound annual growth rate) of 9% during FY23-H1FY26, the company has consistently grown its revenue by 14-17% over the same period, supported by strong inflows, except in FY25.”
BEL’s management remains confident about the outlook and expects to hit order inflows of ₹27,000 crore for FY26. Order inflows for H1 stood at around ₹13,000 crore, which means meeting the full-year guidance may not be too difficult. Additional inflows worth ₹30,000 crore could come through in FY26 if a large QRSAM (quick reaction surface-to-air missile) order is finalized by March as expected.
However, BEL will first build and test prototypes, so the meaningful revenue from the QRSAM project will mostly start FY28 onwards.
In the near term, BEL’s earnings growth will be driven primarily by execution of its existing defence projects. The company has clear delivery schedules for most of FY26, which provides good revenue visibility. BEL plans to spend about ₹1,000 crore in FY26 on capacity and technology upgrades, with close to 90% of this directed towards defence. Plus, it is building a new integration facility in Andhra Pradesh for a planned investment of around ₹1,400 crore spread over three to four years.
Evolving, but expensive
BEL is steadily evolving from a parts supplier into a more advanced defence technology company. For instance, it is collaborating with Larsen & Toubro Ltd on the AMCA (advanced medium combat aircraft) programme, an initiative that could translate into higher-value, high-technology work and better margins over time.
Its debt-free status also bodes well, while a robust cash balance of over ₹8,000 crore provides ample flexibility to fund future capex without resorting to external borrowing or equity dilution.
All said, the company is expected to be a major beneficiary of India’s expanding defence spending, thanks to its role as a key supplier of defence electronics systems. The only caveat is valuation. After the sharp rally, the stock now trades at a pricey 43 times FY27 estimated earnings, according to Bloomberg.
“The current valuation has factored in all the positives for the stock,” said JM Financial Institutional Securities. The broking firm has downgraded its rating on the stock to ‘Add’ from ‘Buy’ earlier. JM Financial expects the company’s revenue and profit-after-tax to grow at a CAGR of 16% and 15%, respectively, over FY25-28. From here, investors will watch closely whether BEL can sustain its earnings momentum over the medium term.
