Defence stock gets an upgrade from Kotak but execution risks temper return expectations
Kotak Securities remains constructive on BEL, supported by a strong pipeline of large defence programmes, including Quick Reaction Surface-to-Air Missile (QRSAM), Advanced Medium Combat Aircraft (AMCA) and naval programmes such as Project-75 India (P75I) and Next Generation Corvette (NGC).
Shares of Bharat Electronics were given an upgrade by brokerage firm Kotak Securities on Tuesday, October 6. The stock though, trades little changed.Kotak Securities upgraded the defence electronics company to "Add" from its earlier rating of "Reduce," citing an improved risk-reward profile following the stock having corrected over 8% during the last three months.The brokerage though, has cut its price target for BEL to ₹410 from ₹420 earlier. The revised price target implies an upside potential of 6.5% from Monday's closing price for BEL.Defence pipeline supports long-term outlookKotak Securities remains constructive on BEL, supported by a strong pipeline of large defence programmes, including Quick Reaction Surface-to-Air Missile , Advanced Medium Combat Aircraft and naval programmes such as Project-75 India and Next Generation Corvette .The brokerage also sees missiles and exports emerging as key medium-term growth drivers for the company.However, it flagged execution and margin normalisation as key risks.
Despite these concerns, healthy order prospects and long-term visibility on defence spending support its constructive view on the stock.As a result of these challenges and risks, Kotak Securities has lowered its financial year 2028-2029 Earnings Per Share estimates by 4% to reflect more moderate execution assumptions.Analysts remain bullish on BELBharat Electronics is a near-consensus "buy" among analysts who cover the stock. 37 out of the 38 analysts covering it have a "buy" rating on the stock, while one solitary analyst has a "sell" recommendation.The consensus estimates of price targets implies an upside potential of 27% from current levels.Shares of Bharat Electronics are trading little changed on Tuesday at ₹384.8. The stock is down 5% in the last one month and as a result, the stock has turned negative on a year-to-date basis.Also Read: Reliance Industries weightage increased in Jefferies model portfolio; Check the two new inclusions
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