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Near-term Slippage; Low Base Underpins Recovery

We believe BDL reported a weak set of numbers in Q4FY26, with a sharp decline in revenue and profitability, leading to a ~27% degrowth in the top line for the full year. The miss appears largely due to execution delays rather than demand weakness, with project timelines getting pushed, thereby affecting revenue recognition during the year. Given the absence of management commentary, visibility on the exact reasons for the slowdown remains limited; however, we believe the nature of the business suggests timing-related deferrals rather than structural issues. Despite the weak performance in FY26, we believe the underlying growth drivers remain intact, supported by a strong order pipeline across key missile programmes, such as MRSAM, QRSAM, Astra and Akash, Akash-NG, VLSRSAM, Nag, HELINA and MPATGM. These programmes, along with increasing opportunities in exports and indigenisation, provide multi-year revenue visibility. Importantly, we expect execution to be driven by ramp-up across MRSAM/LRSAM orders, initial production of QRSAM and continued deliveries in Astra and Akash-NG programmes, which should support revenue conversion in the next two years. The decline in FY26 creates a low base and, as execution normalises, we expect a sharp recovery in earnings over FY27–FY28E, supported by order conversion and operating leverage. We have recalibrated our estimate to factor in the weaker base, while maintaining a strong growth trajectory over the next two years. Accordingly, we revise our target price to INR 1,500, based on 40x FY28E EPS, reflecting continued confidence in the long-term opportunity despite near-term volatility. We maintain our ‘BUY’ rating on the stock, with earnings recovery contingent on execution ramp-up over the next few quarters.

Q4 execution slippage affects earnings

* Revenue for Q4FY26 was down by 72.9% YoY & down by 10.9% QoQ at INR 4,886 Mn (vs Consensus estimate of INR 20,336 Mn)

* EBITDA for Q4FY26 was down by 81.5% YoY but up by 112.8% QoQ at INR 553 Mn (vs Consensus estimate of INR 4,166 Mn). EBITDA margin contracted by 529 bps YoY and stood at 11.3% (vs Consensus estimate of 22.9%)

* PAT for Q4FY26 was down by 58.5% YoY but up by 55.3% QoQ at INR 1,132 Mn (vs Consensus est. INR 3,604 Mn). PAT margin expanded by 802 bps YoY, reaching 23.2% (vs Consensus estimate of 19.5%)

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