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Scale up to commence from delayed orders

Bharat Dynamics (BDL)’s results were ahead of our estimates as the revenue scale-up has commenced with the Akash missile project. We expect further scale-up from both, the Akash and Astra Mk1 projects, to be visible from 2QFY27 onwards. Order inflows are also likely to improve for BDL from the upcoming QRSAM project, follow-on orders for the Astra missile, and potential export orders. However, given the company’s dependence on imports and other supply chain partners, we do see the possibility of delays and an adverse impact on margins due to a higher share of bought-out components. We thus reiterate our Neutral rating with a TP of INR1,270 (based on 42x P/E Sep’28E earnings).

Beat across revenue, EBITDA and PAT

BDL reported a healthy set of results with a beat across revenue, EBITDA and PAT. Revenue jumped 131% YoY to INR5.7b in 1QFY27. The YoY growth was supported by deferred sales from 4QFY26. The gross margin stood at 51.5% vs. our estimate of 60.0%. Absolute EBITDA stood at INR831m vs. a negative EBITDA of INR454m last year. While the gross margin was below our estimate, lower-than-expected employee cost as % of sales softened the impact on the EBITDA margin. The EBITDA margin stood at 14.5% in 1QFY27 vs. our estimate of 15.0%. Better-thanexpected execution and healthy margins supported PAT growth of 548% YoY to INR1.2b (vs. our estimate of INR832m)

A ramp-up in execution expected from 2QFY27

The current quarter’s revenue growth was supported by the execution of the Akash and ATGM programs, with some bookings already recognized during the quarter and further bookings expected over the coming quarters. For the Astra missile, given its relatively higher import content, the revenue contribution is expected to scale up from 3QFY27. The remaining order book is also expected to start contributing to revenue from 2HFY27. In terms of near-term order inflows, the QRSAM order is expected to be finalized by Sep’26, with BDL likely to receive its share by Oct’26, while repeat orders for the Astra missile could also provide an additional boost to the order pipeline. We maintain our estimates and expect revenue to clock a CAGR of 58% over FY26-28, with a ramp-up in execution expected from 2Q.

Financial outlook

We expect overall execution to ramp up 2QFY27 onwards as BDL’s supply-chainrelated issues start to phase out. We maintain our estimates for FY27 and FY28 and expect a revenue/PAT to clock a CAGR of 58%/53% over FY26-28 on a low base, with margins likely to improve gradually as the supply of components commences.

Valuation and view

The stock currently trades at 76.8x/52.4x/41.5x P/E on FY27/FY28/FY29 estimates. We reiterate our Neutral rating on the stock with a TP of INR1,270, based on 42x Sep’28E earnings.

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