Elara Securities has reaffirmed its 'Buy' rating for BEML Ltd., a prominent public sector undertaking in the railway and defence sectors, projecting a substantial 52% upside for its stock. This optimistic outlook comes even as the brokerage adjusted its target price downwards to Rs 2,620 from Rs 2,700, primarily due to anticipated supply chain challenges.
Despite the slight reduction in the target, Elara emphasizes BEML's strong growth visibility extending into fiscal year 2027 (FY27). The firm highlights a robust inflow pipeline and expects BEML to achieve revenue growth of 15-25% over the next three years, driven by significant project execution and increasing export opportunities.
Robust Order Book Fuels Future Growth
BEML has outlined an executable order book of Rs 5,500 crore for FY27, underpinning its ambitious sales growth targets. A major contributor to this growth is the Rail & Metro (R&M) segment, which is forecast to contribute Rs 2,000 crore in sales for FY27—a remarkable 100% year-over-year increase. Key projects in this segment include the Mumbai Metro, Bengaluru Metro, Vande Bharat sleeper trains, and Linke-Hofmann-Busch (LHB) coaches.
The defence segment is also poised for strong performance, with expected revenues of Rs 1,500-1,700 crore for the same fiscal year. Combined, the R&M and defence segments are projected to account for 57-58% of BEML's total sales in FY27, showcasing their strategic importance to the company's financial health.
Expanding Export Potential
BEML is increasingly focusing on international markets, with its exports order book expected to commence execution this year. The company secured its first-ever order for metro rolling stock exports in Q4 FY26, signaling a promising avenue for future growth and diversification beyond domestic demand. This growing export pipeline is anticipated to sustain momentum through FY28-29 as R&M execution ramps up.
Financial Projections and Key Risks
Elara Securities forecasts impressive earnings growth for BEML, projecting an 83% increase during FY26-29E. The brokerage also expects the company to deliver strong returns, with an average Return on Equity (ROE) of 20% and Return on Capital Employed (ROCE) of 19% during FY27-29E. These figures underscore BEML's potential for efficient capital utilization and shareholder value creation.
However, Elara acknowledges potential headwinds, primarily supply chain constraints related to castings and components. These issues could impact project execution, leading to the brokerage's decision to marginally cut earnings estimates for FY27, FY28, and FY29. Despite these challenges, the firm's confidence in BEML's long-term prospects remains high, citing robust order inflows, scope for margin improvement, and untapped export potential as key drivers.