Bharat Electronics (BHE IN) – Q1FY27 Result Update – Decent Q1; Order Inflow remains key monitorable – Accumulate

Bharat Electronics (BEL) reported a decent 1QFY27 performance, with revenue increasing 25.3% YoY, while EBITDA margin contracted 297bps YoY to 25.1% due to a decline in gross margin on account product mix. Management maintained its FY27 guidance of 15% revenue growth and 28% EBITDA margin guidance, with quarterly margins expected to fluctuate based on execution and product mix. EBITDA margins on its products vary from 25% to 31% and thus the management is confident of achieving its guidance. The order book remains healthy at Rs722.6bn, providing strong execution visibility, with key programmes including Electronic Fuses, LRSAM, LCA Mk1 LRUs, BMP-2 upgrades, Ashwini Radar and Arudhra accounting for over Rs200bn of the backlog. Despite a muted order inflow in Q1 (~Rs. 38bn), the full year guidance for order inflow was maintained at Rs550bn, backed by a robust pipeline including QRSAM (~Rs300bn), Shatrughat & Samaghaat EW systems (~Rs90bn), HAMMER (~Rs25bn), Shakti Phase-IV (~Rs20bn) and P75I/NGC programmes. The QRSAM order, a key near-term catalyst, is expected by Sep‘27, with repeat orders from current platforms and Project Kusha (Rs400bn), where BEL is the largest subsystem partner, remain key long-term growth opportunities. Continued indigenisation, with indigenous content currently at ~78–80%, coupled with higher R&D investments, is expected to mitigate input cost pressures and support margin resilience over the medium term. BEL also continues to strengthen its capabilities across counter-drone systems, directed energy weapons, missile electronics, and non-defence applications, while maintaining healthy export visibility, supported by a US$465mn export order book and an export opportunity pipeline of 4–5x the current backlog. The stock is currently trading at PE of 42.2x/36.1x on FY27E/FY28E. We maintain our rating of ‘Accumulate’ valuing the stock at a PE of 40x Mar’28E (same as earlier) arriving at a TP of Rs453 (same as earlier).