Accumulate BEML Ltd for Target Rs. 4,860 by Elara Capitals
Buoyant on robust outlook for FY26
We recently met BEML management where it reiterated robust growth prospects, issuing orderbook target of ~INR 220-230bn by FY26, led by finalization of large ticket orders with a margin expansion guidance of 150bp YoY supported by operating leverage coupled by richer product mix and better cost optimization measures. Furthermore, BEML expects 20% YoY revenue growth in FY26, led by seamless execution of Bengaluru Metro and Vande Bharat with nine train sets left to be delivered with a prototype of maiden train set being cleared in April. With a robust outlook and a promising order pipeline for FY26, we reiterate our positive stance on the stock. We retain our Accumulate rating with a TP of INR 4,860 on 37x March FY27E P/E.
Revenue growth guidance of 20% with margin expansion of 150bp YoY in FY26: BEML has revenue growth target of 20% YoY, led by swift execution of Bengaluru Metro order and the defence segment vs our estimates of 16% YoY, which is conservative, in our view .To sweeten the deal, the company aspires to achieve margin expansion of 150bp YoY in FY26, supported by operating leverage, better product mix, various cost optimization measures and increased contribution of sustenance business.
Order inflow to surge 2x led by a promising pipeline: FY25 order inflow stood at INR 68bn, up 28% YoY, which is expected to double by FY26, supported by finalization of metro orders comprising Chennai, Mumbai, Thane, Pune, & Nashik and setting up of metros in Andhra Pradesh, Chhattisgarh, Madhya Pradesh, as well as expansion of metro lines for Kochi and Hyderabad with rail maintenance vehicles. Additionally, BEML also expects Regional Rapid Transit orders and two high-speed train tenders to fructify in December 2026 for the Mumbai-Ahmedabad corridor.
Robust orderbook guidance to reach ~INR 220-230bn by FY26: Orderbook is likely to reach ~INR 220-230bn by FY26 as it has participated in several tenders in the rail & defense segments, and emergency defence procurement orders are expected to fructify in the near to medium term. The orderbook mix is expected to be in the ratio of 20:20:60 for mining: defense: rail, respectively, in FY26.
Significant capex plans in place to meet robust demand: BEML has lined up a robust expansion plan entailing a capex of INR 18bn across five phases for the Bhopal plant with first phase capex to be ~INR 2.2bn. It has been looking for a partner for debt funding, which is receiving a positive response for the Bhopal plant. Post completion of capex after five phases, Bhopal peak capacity is to be ~450 cars with 150 to be rolled out every year. FY26 capex guidance stands at INR 6bn with FY27 capex expected to be at similar levels.
Reiterate Accumulate with a TP of INR 4,860: With a robust outlook with a promising orderpipeline along with solid guidance on orderbook & inflow coupled by bold capex plans, we remain positive. We reiterate Accumulate with a unchanged TP of INR 4,860 based on 37x March FY27E P/E. We expect a CAGR earnings of 34% during FY25-28E with an average ROE and ROCE of 16% each during FY26-28E.
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SEBI Registration number is INH000000933
