Bharat Dynamics execution ramp-up hinges on Akash, Astra and QRSAM orders

Investment View and Valuation

Motilal Oswal Financial Services (MOFSL) has reiterated its Neutral rating on Bharat Dynamics with a target price of Rs 1,270, based on 42 times September 2028 estimated earnings. The broker says 1QFY27 performance was ahead of its estimates as revenue scale-up began on the Akash missile project.

MOFSL sees scope for further execution growth from the Akash and Astra Mk1 programmes, along with prospective QRSAM, repeat Astra and export orders. However, it remains cautious about Bharat Dynamics’ dependence on imports and supply-chain partners, which could delay execution and pressure margins through a higher share of bought-out components.

1QFY27 Financial Performance

Bharat Dynamics reported 1QFY27 revenue of Rs 570 crore, up 131 per cent year on year and above MOFSL’s estimate of Rs 480 crore. The strong year-on-year growth was aided by sales deferred from 4QFY26.

Lower-than-expected employee cost as a share of sales partly offset the lower gross margin. Reported PAT exceeded MOFSL’s estimate, supported by better execution and healthy margins.

Execution Outlook and Order Pipeline

Revenue execution during the quarter was led by the Akash and ATGM programmes. MOFSL expects additional Akash and Astra Mk1 scale-up from 2QFY27. Astra’s revenue contribution is expected to increase from 3QFY27 because of its relatively high import content. The remaining order book is expected to start contributing from 2HFY27.

In the near-term pipeline, MOFSL expects the QRSAM order to be finalised by September 2026, with Bharat Dynamics likely to receive its share by October 2026. Follow-on Astra orders could provide another uplift to order inflows.

Medium-Term Drivers

• The Defence Acquisition Council approved in principle, on July 3, 2026, procurements worth around Rs 52,000 crore, including MRSAM, VSHORADS, MPATGM and other air-defence and anti-armour systems. MOFSL believes these approvals strengthen the medium-term missile-ordering pipeline, where Bharat Dynamics is positioned in several categories.
• Bharat Dynamics signed an agreement with Indonesia’s Republikorp for cooperation on Astra air-to-air missiles. MOFSL views this as an important export step that could create a first major international reference customer and support future orders or co-production opportunities.
• The company received a Rs 1,350 crore order from HAL for Helina LRUs and CMDS LRUs, to be executed over 24 to 60 months.

Estimates and Operating Outlook

MOFSL has maintained its FY27 and FY28 estimates, expecting supply-chain issues to phase out and overall execution to ramp up from 2QFY27. Its estimates imply revenue and PAT CAGR of 58 per cent and 53 per cent, respectively, over FY26-FY28.

The broker expects gradual margin improvement as component supply begins. It forecasts order book CAGR of 24 per cent over FY26-FY28, gross margin of around 40-45 per cent and EBITDA margin of around 15-16 per cent.

Valuation and Key Risks

At the report CMP of Rs 1,399, the stock traded at 76.8 times FY27E, 52.4 times FY28E and 41.5 times FY29E price-to-earnings.

Key risks identified by MOFSL include:

• A decline or reprioritisation of the Indian defence budget.
• Contract termination or unsuccessful tendering.
• Changes in Ministry of Defence or government procurement rules.
• Prolonged supply-chain disruption.