UBS Upgrades BEL: Defence Stocks Shine as Orderbook Surges
UBS Boosts BEL’s Outlook
Shares of state-run Bharat Electronics Ltd. (BEL), a major player in India’s defence sector, are flying high today after receiving a significant upgrade from investment bank UBS. UBS has become increasingly bullish on BEL, shifting their rating from ‘neutral’ to a strong ‘buy’. This positive signal has sent ripples through the market, driving up the stock price and capturing the attention of investors.
Price Target Increased, Upside Potential
The upgrade comes with a hefty 40% increase in UBS’s price target for BEL. The new target price of ₹450 represents an impressive 18% potential upside from Thursday’s closing price of ₹383.5. This bold move by UBS places their price target on BEL as the highest among all analysts covering the stock, surpassing even JPMorgan’s target of ₹445.
Strong Order Book Drives Optimism
UBS’s optimism stems from their expectation of a significant surge in BEL’s order book between fiscal years 2025 and 2028. The brokerage firm believes that a long-term order pipeline of nearly ₹2.4 lakh crore is poised to convert into actual orders, fueling BEL’s growth trajectory. They point to BEL’s track record of successfully integrating or upgrading major defence platforms, including the Akash Missile System, the IACC control system, and the L70 gun upgrade, as evidence of their growing capabilities and market dominance.
BEL: UBS’s Top Defence Pick
UBS has declared BEL as their preferred pick within the Indian defence sector, citing its strong expected earnings growth and the anticipated rapid increase in its order book over the next three years. This endorsement comes after UBS recently downgraded Hindustan Aeronautics Ltd. (HAL) to ‘neutral’ from ‘buy’, reflecting their shifting focus within the sector.
Valuing BEL at a Premium
To reflect the significant upside potential in BEL’s earnings and order flows, both domestically and globally, UBS has assigned a price-to-earnings multiple of 45 times the projected earnings for the next 12 months. This premium valuation highlights the brokerage’s confidence in BEL’s future prospects.
Positive Outlook for Order Inflows
BEL itself has projected order inflows of up to ₹27,000 crore in the new financial year, excluding the potential ₹30,000 crore inflow from the Quick Reaction Surface-to-Air Missile order. This strong order pipeline further reinforces UBS’s bullish outlook on BEL.
Market Sentiment: Overwhelmingly Positive
The market sentiment towards BEL is overwhelmingly positive, with 25 out of 29 analysts covering the stock holding a ‘buy’ rating. The remaining analysts hold either a ‘hold’ or a ‘sell’ rating, indicating a strong consensus among industry experts regarding BEL’s growth potential.
