PSU stock trading at discount of 41% to buy now for an upside of more than 30%

Shares of one of India’s leading defence Public Sector Undertakings (PSUs) engaged in the manufacturing of guided missiles and allied defence equipments moved up by nearly 2.3 percent, during the morning trading session of Wednesday. 

Price Movement

With a market cap of Rs. 38,787 crores, at 09:33 a.m., the shares of Bharat Dynamics Limited were trading in the green at Rs. 1,058.15 on BSE, up by nearly 1 percent, as compared to its previous closing price of Rs. 1,048.9. 

The stock hit its 52-week high at Rs. 1,794.7 on 5th July 2024, and compared to its current trading price of Rs. 1,058, the stock is trading at a discount of nearly 41 percent. The stock has delivered positive returns of nearly 17.5 percent in one year, while around 13 percent of negative returns in the last one month. 

Brokerage Target & Outlook

The brokerage firm ICICI Securities has maintained a “buy” rating on Bharat Dynamics and assigned a target price of Rs. 1,400 per share, representing a potential upside of nearly 32 percent from the current trading price. 

As per the brokerage, the major positive in the Q3 FY25 result was the acceleration of execution. While BDL always had a comfortable order book (OB) and book-to-bill ratio, execution had been lagging due to global supply chain issues. 

With the residual Medium Range Surface to Air Missile (MRSAM) revenue likely to be recognised over the next few quarters and the execution of Akash’s third and fourth regiments expected to commence, revenue growth traction is expected to continue. 

The order for Quick Reaction Surface-to-Air Missile (QRSAM), estimated at Rs. 25,000 crores, would further boost the OB, in addition to expected orders from the export market. BDL’s performance is anticipated to improve further, as execution has visibly picked up, leading to higher margins. Additionally, the OB remains strong, and the MRSAM backlog is also likely to be cleared. 

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Order Book

The total order book of Bharat Dynamics as of 1st April 2024 stood at Rs. 19,434 crores, while by 30th September 2024, the OB was Rs. 18,852 crores. In FY25, the company secured new orders worth Rs. 154 crores. 

The company’s export order position reached nearly Rs. 2,445 crores as of September 30, 2024. Additionally, the orders in the pipeline for the next 2-3 years are estimated to be around Rs. 20,000 crores. 

The company is concentrating on strengthening its indigenous production capabilities and expanding its export portfolio, with a clear growth strategy fueled by new defence contracts and strategic investments. 

Financial Performance

Bharat Dynamics reported a significant growth in revenue from operations, experiencing a year-on-year increase of nearly 38.2 percent, rising from Rs. 602 crores in Q3 FY24 to Rs. 832 crores in Q3 FY25. 

Similarly, during the same period, the company’s net profit increased from Rs. 135 crores to Rs. 147 crores, representing a significant growth of around 9 percent YoY. 

About the Company

Bharat Dynamics Limited (BDL), a Government of India Enterprise under the Ministry of Defence, is engaged in the business of manufacturing Missiles and allied Defence Equipments. It provides a majority of its goods and services to the Indian Armed Forces and the Government of India. 

The company has three manufacturing units, located at Kanchanbagh (Hyderabad) in Telangana State, Bhanur (Sangareddy District) in Telangana State and Visakhapatnam in Andhra Pradesh. BDL is in the process of setting up additional facilities at Amaravati (Maharashtra), lbrahimpatnam (Telangana) and Jhansi (Uttar Pradesh). 

Written by Shivani Singh

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