Bharat Electronics Ltd’s (BEL) June quarter (Q1FY27) results displayed a sharp divergence in revenue and earnings performance. Revenue grew by an impressive 25% year-on-year to ₹5,533 crore, reflecting strong execution, but Ebitda margin contracted 297 basis points (bps) to 25.1% due to surge in raw material costs.
Thus, Ebitda grew at a comparatively slower pace of 12%. So, while Q1FY27 revenue growth was higher than FY27 guidance of 15%, Ebitda margin was well short of 28%-plus guidance.
The management said in the earnings call that material costs can vary significantly on a quarterly basis, while maintaining FY27 margin guidance. The state-owned defence-focussed electronics products manufacturer had beaten its FY26 guidance of 15% revenue growth and 28%-plus Ebitda margin, clocking 16% growth and 29% margin.
FY27 revenue growth guidance implies “about 14% growth ask for the remaining 9MFY27, which is achievable in our view,” said JM Financial Institutional Securities.
BEL’s Q1FY27 order inflow was dull at ₹3,800 crore, almost half of Q1FY26. The management maintained its guidance of ₹55,000 crore for FY27, which includes a large QRSAM (quick reaction surface-to-air missile) order worth ₹30,000 crore. The order is expected to get the Cabinet Committee on Security approval by September.
Despite muted inflows, BEL’s order book is robust at ₹72,300 crore, 2.5 times its trailing 12-month sales, providing significant revenue visibility.
“Execution ramp-up of air-defence programmes (LRSAM, Akash, LCA radars and QRSAM/Kusha) with growing repairs/upgrades/exports should underpin healthy growth in the long term for BEL,” noted Nuvama Institutional Equities, projecting its earnings per share to grow by 14% CAGR over FY26-28. Defence contributes 90% of BEL’s total orders.
BEL is seeing significant traction in drone and counter-drone systems, with capability to build D4 anti-drone systems (drone detect, deter, and destroy), and is developing some products jointly with various startups. BEL is also focussing on exports, which now contribute about $465 million (about ₹4,500 crore) to the order book, and non-defence segments such as data centre.
The management said export leads are 4-5 times of current order book, and targeted export order inflow in FY27 is $300 million. BEL aims to grow its exports and non-defence revenue share from about 5% and 8% now to 10% and 15-20% gradually.
BEL plans to invest about ₹2,200 crore in R&D in FY27, largely for indigenization and technology upgrade, while capital expenditure is seen at ₹1,200 crore. The government had allowed the company to retain incremental profits from indigenization for capability upgrade, R&D etc. BEL has achieved indigenization levels of 80% versus about 60% till FY22, and aims to eliminate all component imports except semiconductors over the next five years.
BEL’s shares trade at a 12-month forward price-to-earnings multiple of 41, as per Bloomberg consensus, versus its long-term average of about 32. The company must sustain the strong execution momentum, and protect its margins to justify its rich valuation. Any delays in the award of orders or execution due to issues in component supplies, etc. could weigh on BEL’s growth trajectory.