Bharat Electronics (BHE IN) – Q4FY26 Result Update – Order pipeline remains healthy – Upgrade to ‘ACCUMULATE’

We revise our EPS estimates for FY27/FY28E by +1.3%/2.8% factoring in sustained healthy execution momentum and margin profile. Bharat Electronics (BEL) reported a healthy 4QFY26 performance, with revenues growing 11.6% YoY while EBITDA margins contracted 147bps YoY to 29.1%. Management retained FY27 guidance of >15% YoY revenue growth and Rs550bn order inflow supported by large opportunities such as QRSAM, P75I submarines, next-generation corvettes, Shakti EW systems and MFR radars. The order book remains robust at ~Rs739bn, providing strong multi-year visibility, with key executable programs including electronic fuses (Rs43bn), LRSAM (~Rs35bn), LCA Mk1A LRUs (~Rs35bn), BMP-2 upgrades (Rs28bn+), Ashwini radars and EW systems. The QRSAM order, a key near-term catalyst, is anticipated by June'27 with the first production model expected within 18 months of contract signing. BEL continues to strengthen its positioning in emerging areas such as drones, quantum technologies, AI-led systems, cyber security, directed-energy weapons and indigenous data centres through partnerships with DRDO, startups and academia, alongside increasing investments in R&D and high-performance computing infrastructure. Additionally, rising indigenisation (~80–85%), growing export opportunities and increasing non-defence contribution (from 8% to 15%) are expected to support medium-term growth. The stock is currently trading at PE of 42.8x/36.5x on FY27E/FY28E. We roll forward to Mar’28E and upgrade our rating from ‘Reduce’ to ‘Accumulate’ given recent correction in stock price while valuing the stock at a PE of 40x Mar’28E (40x Sep’27E earlier) arriving at a TP of Rs453 (Rs411 earlier).