Bharat Electronics order backlog and QRSAM pipeline reinforce defence earnings visibility

Investment View and Valuation

ICICI Direct Research maintains a BUY rating on Bharat Electronics (BEL), supported by the company’s substantial order backlog, healthy execution pipeline, rising indigenous content and opportunities in strategic defence programmes. The broker values BEL at 45 times FY28E EPS to arrive at a target price of Rs 530 per share.

Q4 FY26 and Full-Year Financial Performance

BEL reported Q4 FY26 revenue of Rs 10,224.4 crore, up 11.7 per cent year-on-year and 42.9 per cent quarter-on-quarter, in line with expectations and provisional numbers. EBITDA rose 5.9 per cent year-on-year to Rs 2,981.7 crore, while EBITDA margin declined 162 basis points year-on-year to 29.2 per cent. PAT grew 4.7 per cent year-on-year to Rs 2,226.4 crore.

For FY26, revenue increased 16.2 per cent to Rs 27,610 crore, EBITDA margin improved 40 basis points to 29.2 per cent and PAT rose 13.9 per cent to Rs 6,062 crore. ICICI Direct attributes the FY26 margin improvement to healthy execution and increasing indigenisation.

Growth Outlook and Order-Book Visibility

Management guided for FY27E revenue growth of more than 15 per cent and EBITDA margin above 28 per cent. FY26 order inflows were Rs 30,045 crore, while the order backlog stood at Rs 73,882 crore as of March 2026. The backlog is equivalent to 2.8 times FY26 revenue and provides execution visibility over roughly two to three years.

Management has guided for more than Rs 55,000 crore of order inflows in FY27E, including the approximately Rs 30,000 crore QRSAM order. QRSAM signing is expected by the end of June, with a 5-10 per cent chance of slippage to July. The first off-production model is expected within 18 months of signing. Its margin profile is expected to be broadly similar to the existing business, subject to final back-to-back contracting.

Key Backlog Programmes

Strategic Defence Opportunities

Near- and medium-term opportunities include Next Generation Corvettes, Shatrughat and Samaghat electronic warfare solutions, P-75I submarine electronics, HAMMER, Shakti Phase IV, MFR-X radar, AMCA and Project Kusha.

• For P-75I, BEL expects to supply 50-60 per cent of electronics content across six major subsystems.
• BEL is pursuing AMCA through a 50:50 partnership with L&T.
• Management expects Project Kusha orders comparable with QRSAM by FY28-29.
• Maiden firing trials for Project Kusha are expected by July 2026, while the first production order is expected by December 2029.

Business Mix, Indigenisation and Investment Plans

Defence contributes approximately 90 per cent of BEL revenue, while non-defence contributes approximately 10 per cent. Management targets a 15-20 per cent non-defence mix over the long term. Exports currently account for 4-5 per cent of revenue, with an FY27 export target of Rs 930 crore and a longer-term aim to exceed 10 per cent.

Indigenous content is around 80-85 per cent and can rise to around 90 per cent in DRDO-led programmes, supporting gross-margin resilience. FY27 capex is guided at more than Rs 1,200 crore, while R&D investment is expected to be around Rs 2,200 crore. R&D investments include drone electronics, quantum communications, AI-led systems, cyber-secure platforms and directed energy weapons.

Key Risks and Working Capital

• Dependence on government contracts.
• High working-capital requirements.
• Availability of key raw materials and components.

Management guided FY27 receivable days at 140-150 days.