Bharat Electronics Shares Fall 4% After Q1 Results As Margins Disappoint Investors

Mumbai, July 28: Bharat Electronics (BEL) shares fell nearly 4% on Tuesday after the state-owned defence electronics company reported its June-quarter results, with weaker-than-expected operating margins overshadowing strong revenue growth. 

The stock came under pressure as investors assessed the company’s first-quarter performance and order inflows against its growth outlook. While revenue and profit increased in the April-June quarter, a decline in operating margins raised concerns over near-term profitability, prompting a mixed response from brokerages. 

BEL reported an 8% year-on-year increase in consolidated net profit to ₹1,048 crore for the first quarter of FY27, compared with ₹969 crore in the same period last year. Revenue from operations rose 25% to ₹5,533 crore from ₹4,417 crore a year earlier. 

The company’s order book stood at ₹72,258 crore as of July 1, providing significant revenue visibility. However, total income declined 24% year-on-year to ₹5,701 crore from ₹7,501 crore, while total expenses rose 31% to ₹4,298 crore from ₹3,283 crore. 

Margins emerge as key concern 

The key disappointment for investors was BEL’s operating margin performance. EBITDA margin fell to 25.1% during the quarter, with the decline attributed largely to the execution mix. 

Stock slid as investors worried over margins. Source: NSE 

Despite the near-term pressure, management retained its FY27 EBITDA margin guidance of more than 28%. Brokerages said the unchanged guidance suggests that the company expects margins to recover as the execution mix improves over the remainder of the financial year. 

Brokerages divided on stock outlook 

Some brokers maintained a ‘Neutral’ rating on BEL saying strong revenue growth was offset by weaker-than-expected margins. They expect BEL to deliver a 15% compound annual growth rate in profit after tax. 

They also highlighted management’s confidence in achieving its FY27 order inflow target of ₹55,000 crore, supported by the QRSAM programme. They said the company’s longer-term growth prospects remain underpinned by defence indigenisation and emerging opportunities. 

Other brokers remained bullish, retaining ‘Buy’ rating. The brokerages said revenue growth exceeded expectations despite the decline in EBITDA margins. They noted that BEL has achieved 16% of its FY27 order inflow target of ₹55,000 crore, excluding the QRSAM programme. 

The brokerages also reiterated expectations of more than 15% revenue growth and earnings CAGR, while highlighting management’s confidence in maintaining an EBITDA margin above 28%. 

Order inflows in focus 

Some brokers retained ‘Outperform’ rating, saying first-quarter order inflows were soft because of a temporary slowdown in government procurement. 

However, the brokerages noted that revenue grew 25% on strong execution of existing orders. They said management maintained its FY27 guidance for robust order inflows and an EBITDA margin of 28%, while pointing to opportunities linked to the AMCA fighter aircraft programme and S-400 system support as long-term growth drivers. 

Analysts said BEL’s June-quarter performance was ahead of expectations and noted management’s confidence in achieving order inflows of more than ₹55,000 crore in FY27 despite a weak first quarter. 

According to them, management attributed the lower order inflows to timing-related factors, including some orders being advanced into the fourth quarter of FY26 and procedural delays in certain programmes. 

Long-term growth story remains intact 

Brokers said execution remained healthy. 

They expect momentum to improve as the company executes on air defence projects such as Akash and LCA radars, while repairs, upgrades and exports could provide additional growth opportunities. 

The contrasting brokerage views underline the key debate around BEL’s stock: whether the near-term margin pressure is temporary or signals a more sustained moderation in profitability. With the company retaining its FY27 guidance and carrying a large order book, investors are likely to focus on the pace of order inflows, margin recovery and execution over the coming quarters. 

Source

• https://www.nseindia.com/get-quote/equity/BEL/Bharat-Electronics-Limited