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Earning visibility underpins TP enhancement

We remain optimistic on BHE, given its robust order book stands at INR 716.5Bn (3.0x FY25 Revenue). We believe the companies order inflow will gain traction due to emergency procurement and speeding up the existing projects. supported by marquee upcoming projects such as the INR 300+Bn QRSAM order and the INR 400Bn Project Kusha. The company’s diversified pipeline, including NGC subsystems, additional LCA orders, and critical defense systems like LRSAM & radar solutions, positions it well for sustained revenue growth and market leadership.

We have introduced FY28E estimates and, based on the average FY27/28E EPS, revised our target price to INR 500 (earlier INR 420), valuing the stock at 40x, while maintaining our ‘BUY’ rating. The revision reflects our continued confidence in BHE’s long-term growth visibility and strong execution capabilities.

Demonstrated Capability and Strong Growth Visibility

BHE’s platforms delivered exceptional performance during Operation Sindoor, reinforcing armed forces' confidence and highlighting its capability in mission-critical systems gaining global recognition. With the MoD announcing an INR 400–500 Bn emergency procurement program, BHE is well-placed to benefit. Its robust INR 716 Bn order book, INR 270Bn assured orders for FY26E, and key programs like QRSAM, LCA upgrades, and NGC subsystems provide strong growth visibility

Amid rising geopolitical tensions, BHE is fast-tracking replenishment orders, supported by a resilient MSME ecosystem (~35% contribution), driving faster execution and margin expansion. The company is also expanding exports, especially to Europe, and investing in emerging technologies like drones and AI, enhancing long-term growth visibility.

What makes BHE a strong investment opportunity in 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 non-defense 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:

I. QR-SAM, MR-SAM, Kusha Project, Akash SAM, order inflow,

II. We expect significant amount of defense business to come from Europe in near to medium term

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