Hold BEML; target of Rs 1982 Prabhudas Lilladher

Prabhudas Lilladher's research report on BEML

We revised our FY27/FY28E EPS estimates by -7.6%/-4.7% factoring in slower execution pace and supply chain issues. BEML reported a muted Q2FY26 performance, with revenue declining 2.4% YoY to Rs8.4bn and EBITDA margin remaining stable YoY at 8.7%. Despite execution headwinds, the company maintained a robust order book of Rs163.4bn, supported by sustained momentum in private and public capex across mining, railways, and defense. Order inflows stood at Rs27bn in Q2FY26, driven by a Rs18.9bn order from the Integral Coach Factory under railways and ~Rs6bn order for HMVs from the defense segment Export contribution is expected to improve to ~4% in FY26 (vs ~1% in FY25) alongside a rising defense mix (~30% in FY26 vs 27% in FY25), which should aid margin recovery over time. However, CFO weakened sharply to -Rs2.4bn as of H1FY26 (vs +Rs1.8bn as of FY25), exerting pressure on the balance sheet. While the medium-term outlook remains healthy, near-term growth visibility is constrained by slower project ramp-up and supply chain bottlenecks.

Outlook

The stock is currently trading at a PE of 30.1x/24.6x on FY27/28E. We roll forward to Sep’27E and maintain our ‘Hold’ rating on stock with a TP of Rs1,982 (Rs2071 earlier) valuing the stock at a PE of 27xSep’27E (29x Mar’27E earlier).