Bharat Dynamics - Execution Likely To Pick Up: ICICI Securities

ICICI Securities Report

While FY24 revenue was impacted by supply-chain issues, we expect Bharat Dynamics Ltd.'s revenue to pick up from Q2 FY25 primarily led by execution of anti tank guided missiles, surface to air missiles and export orders.

In FY26E, we expect revenue growth to be primarily driven by the execution of third and fourth regiment of Akash. While margins are likely to be slightly lower as execution of weapon systems entails higher component of bought out items, we are positive on the management’s guidance of doubling the revenue over the next five years and reaching Rs 100 billion in next 10 years.

Overall focus of the government in augmenting rocket force along the border implies missile/rocket programmes are likely to be expedited.

Factoring management’s guidance, we have lowered our revenue estimates for FY25/26E by 24%/29%; however, we raise our long-term revenue forecast from Rs 70 billion to Rs 100 billion.

Besides, we raise the terminal growth estimate to 7.5% (earlier 7%) owing to the fresh revenue streams and the new platforms the company is pursuing. Our revised target price works out to Rs 1,745 (earlier Rs 1,630). Maintain Add.

Key risks

• Delay in receipt of components and parts due to the ongoing Israel – Palestine skirmish.

• Execution delay in key platforms such as SAMs and torpedoes. 

• Higher LD provisioning

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