Target: ₹2,700
CMP: ₹1,797.45
BEML’s revenue is likely to enter a two-digit growth trajectory from FY27 as a large portion of its order book of ₹16,000 crore, primarily comprising from railway & metro (R&M) and defence, would see strong execution momentum. Management retained revenue target of 20 per cent in FY26 with margin improvement by 150 bps, although we believe it is a daunting task as H1 revenue fell by 1 per cent y-o-y.
We lower our FY26 EPS by 2 per cent, by 6 per cent for FY27E and 5 per cent for FY28E on account of delay in execution of the VB sleeper and Mumbai metro orders. Hence, we lower our target price to ₹2,700 from ₹2,780 on 37x ( unchanged ) September FY27E P/E.
However, we retain Buy, due to strong order visibility in R&M and defence, scaling up exports opportunity in high-end mining equipment, providing scope for margin improvement and focus on new areas, such as Advanced Medium Combat Aircraft (AMCA), maritime trains and engines.
We expect an earnings CAGR of 31 per cent during FY2 5-28E with an average ROE of 17 per cent and ROCE of 16 per cent during FY26-28E .
Key risks would be the delay in receipt of new orders and execution of large R&M orders.