Motilal Oswal wants lower levels in shares of Bharat Dynamics to enter the stock

Shares of Bharat Dynamics Ltd. are off the highs of the day and are trading 4% lower on Thursday, July 10. The sharp fall in the stock price was seen following a note from brokerage firm Motilal Oswal.

The brokerage initiated coverage on Bharat Dynamics with a 'Neutral' rating and a price target of ₹1,900 per share, implying a 4%downside from Wednesday's closing levels.

Motilal said it likes BDL's business model and its ability to scale revenues and grow its order book in the current scenario. However, given the current fair valuations, it would prefer lower entry points.

The brokerage mentioned that Bharat Dynamics is a prominent player in missile technology within the defense sector and has established itself as a leading integrator for various missile platforms.

With a focus on developing advanced guided missiles, underwater weapons, and airborne products, the company currently holds an order book of ₹22,700 crore and a prospect pipeline of ₹50,000 crore.

BDL's revenues have been impacted in recent years by supply chain disruptions and challenges in sourcing key components from Russia and Israel. However, these issues are now easing, and the brokerage expects a recovery in revenue growth.

Motilal also sees BDL benefiting from upcoming emergency procurement opportunities and large-scale orders such as QRSAM.

It estimates a revenue CAGR of 35% for FY25-28. With ongoing investments in backward integration and a rising share of indigenised products, EBITDA margins are expected to remain healthy at 24-26%.

This, in turn, is estimated to drive an EBITDA and PAT CAGR of 64% and 51%, respectively, over FY25-28.

The stock is currently trading at a price-to-earnings (P/E) ratio of 70x for FY26, 52x for FY27, and 38x for FY28 estimates.

On the charts, Bharat Dynamics is nearing the overbought territory as its Relative Strength Index (RSI) is at 60.5. An RSI reading above 70 indicates that the stock is overbought.

Shares of Bharat Dynamics are trading 3.88% lower currently at ₹1,908.10. Despite the correction, the stock is still down 9% from its highs.

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