Bharat Dynamics Ltd.

About Bharat Dynamics

Incorporated in 1970 in Hyderabad, Bharat Dynamics is a Government of India strategically important prime production agency for guided weapons systems for Indian defence forces. It also makes underwater weapons systems and surface-to-air missiles, and refurbishes vintage defence equipment for the Indian Army. It has three existing facilities: one in Vishakhapatnam (AP) and two in Telangana; three more are planned, in Maharashtra, UP and Telangana.

Investment Rationale

• Large order book: Order book stood at INR 22,700 Cr. as on 01-Apr’25, up 16.8% versus 31-Mar’24 and equivalent to 6.8x FY25 sales. The note describes this as the highest order-book-to-sales ratio amongst peers.
• Recent contract wins: BDL received an INR 4,362 Cr. order to supply armaments to the Indian Armed Forces on 26-Mar’25 and an INR 2,960 Cr. order for medium-range surface-to-air missiles for the Indian Navy on 16-Jan’25. The note cites an approximate INR 20,000 Cr. order pipeline over the next 2-3 years, based on the Investor PPT dated 29-Nov’24.
• FY25 revenue recovery: Operating revenue increased 41.2% Y-o-Y to INR 3,345 Cr. after declining in FY23 and FY24. Exports contributed ~36% of FY25 revenue, at INR 1,200 Cr. versus INR 161 Cr. in FY24, while domestic revenue was INR 2,145 Cr. versus INR 2,208 Cr.
• Potential margin recovery: FY25 EBITDA margin fell to 14.1% from 22.6% in FY24, which the note attributes to higher raw-material costs, contract provisions and one-time adjustments. CRISIL expects operating margins of 17%-18% in the medium term, which the analyst expects to be achievable.
• Strategic role and capacity: BDL is described as the prime production agency for guided weapons systems for Indian defence forces. Three additional manufacturing facilities are planned, one each in Maharashtra, UP and Telangana.

Bharat Dynamics Key Financials

FY25 revenue growth followed declines in FY23 and FY24. The note links the earlier de-growth to delays in receiving certain raw materials from foreign OEMs amid the Russia-Ukraine war and conflicts in the Middle East. It also reports CRISIL’s medium-term revenue growth expectation of 13%-15%, led by a stable order execution rate.

Valuation and Target Price

The report classifies Bharat Dynamics as Unrated and does not provide a target price or upside. It notes a CMP of INR 1,966/- as at 10-Jun’25 and a market capitalisation of INR 72,072 Cr.

INR 1,966/-

CMP (10-Jun’25)

Unrated

Report rating

No target price stated

Key Risks

• Contract margins: BDL bids on fixed-rate contracts, which can limit profitability; higher raw-material costs linked to global events may further compress margins.
• DRDO-related delays: The company relies on DRDO for technical modifications to orders. Delays in finalisation can make BDL liable for damages.
• Working capital: Operations require substantial working capital, with revenue dependent on customer clearances and products having a higher gestation period.
• Procurement and domestic demand: The note identifies domestic revenue expansion and easing raw-material procurement issues as monitorables for margin growth.

Order Book and Operations

The company serves domestic and export orders. The report’s peer table shows BDL’s order book at INR 22,700 Cr., with 16.8% growth, and its order-book-to-sales ratio at 6.8x. The note also records a CRISIL A1+ credit rating, reaffirmed on 19-Nov’24.

Revenue mix: FY25 exports were INR 1,200 Cr. compared with INR 161 Cr. in FY24. Domestic revenues were INR 2,145 Cr. in FY25 and INR 2,208 Cr. in FY24.

Peer Comparison

The report’s selected peer comparison places BDL’s order-book-to-sales ratio above those shown for the other listed peers below; its valuation multiples are also shown in the table.

Our View

BDL’s sizeable order book, export growth and planned capacity additions support the case for future revenue growth, while the note sees scope for operating margins to improve from FY25 levels. Fixed-price contracts, raw-material procurement and working-capital requirements remain key risks. The report’s verdict is Unrated, with no target price.

Standard disclosures

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Regulatory disclosures

Minerva Capital Research Solutions is an independent investment advisory firm founded by Nishant Gupta(SEBI registration no. INH000018896).

Registration granted by SEBI and certification from NISM in no way promise or guarantee that the research recommendation will provide any assured, minimum or risk-free return to the investors.

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Rating rationale

Minerva Capital Research Solutions endeavors to provide objective opinions and recommendations. Ratings are assigned to stocks according to their fair value vs current market price and then categorizes them as Buy, Hold, Reduce, Sell. The performance horizon is one year unless specified and fair value is defined as analyst’s valuation for a stock.

• Buy:> 15%
• Hold: -5% to 15%
• Reduce: -15% to -5%
• Sell: <-15%