Buy Bharat Electronics Ltd For Target Rs. 420 By Choice Broking Ltd
Business Overview: BHE, a leading Indian defense and aerospace electronics company under the MoD, specializes in advanced electronic systems for defense, aerospace, and civilian applications. Its portfolio includes radars, communication systems, avionics, missile guidance, etc. Serving key clients like the Indian Armed Forces, DRDO, ISRO, and international defense organizations, BHE plays a vital role in defense modernization and the Aatmanirbhar Bharat initiative. With an unexecuted order book of INR 716.5 Bn (3.0x FY25 revenue), the company ensures strong visibility and steady growth.
How is BHE positioned to be a key beneficiary of the India's defense eco-system & Export potential
BHE’s platforms demonstrated exceptional performance during Operation Sindoor, with extensive deployment in the India-Pakistan conflict. This success has reinforced the Indian armed forces‘ confidence in BHE’s capabilities while show casing its ability to deliver complex, mission-critical; systems an expertise now gaining recognition in international markets. With the MoD announcing an emergency procurement program worth INR 400-500 Bn, BHE is well-positioned to emerge as a key beneficiary. The company’s robust order book of over INR 716 Bn, combined with high-visibility projects such as the INR 300+ Bn QRSAM, INR 270 Bn in assured orders in FY26E, and strategic programs like NGC subsystems, LCA upgrades, and radar and EW systems, provides strong revenue growth momentum and cements BHE’s leadership in the sector.
We expect in response to rising geopolitical tensions, BHE is accelerating project execution for replenishment order, supported by a strong MSME vendor eco-system contributing ~35% to project execution. This is expected to drive faster revenue recognition, while its in-house designed, supports healthy margin expansion. Furthermore, BHE is tapping into growing export opportunities, particularly in Europe, and is actively investing in emerging tech such as drone warfare and AI-integrated solutions. These initiatives enhance BHE’s future earnings visibility and positioned the company for sustained long-term growth.
What makes BHE a strong investment opportunity in India's defense sector?
Our research indicates that electronic components, parts, and equipment contribute approximately 30-60% of the total cost of defense equipment, depending on the platform type. BHE holds a strategic position within India's defense sector, catering to all three branches of the armed forces and serving as a key supplier to major defense companies.
Additionally, BHE is well placed within the defense sector, because BHE not solely reliant on order inflows from major DPSUs. Its diversified portfolio, strong R&D capabilities, and increasing presence in both defense and nondefense sectors enhance its long-term growth potential. The company's ability to secure independent contracts from other DPSU’s and expand into new technological domains like AI, Cybersecurity, further strengthens its investment appeal.
Near term triggers: 1) QR-SAM, MR-SAM, Kusha Project, Akash SAM, 2) We expect significant amount of defense business comes from Europe in near to medium term.
Valuation: Currently we have a “BUY” rating on the stock with a Target Price of INR 420.
Key Risks:
? Supply chain risk – Dependence on specific raw materials, semiconductors, and critical components can lead to delays and cost overruns due to global shortages or trade restrictions. ? Market risk – Changes in defense policies, economic downturns, & shifting government priorities can reduce demand for defense products and services.
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SEBI Registration no.: INZ 000160131
