Bharat Dynamics Ltd (BDL) shares are likely to remain in focus after global brokerage Goldman Sachs maintained its ‘Sell’ rating on the defence manufacturer and lowered its target price to ₹1,260 from ₹1,375.
The brokerage said Bharat Dynamics has continued to face execution-related challenges, noting that the company has missed execution expectations for the seventh consecutive year.
According to Goldman Sachs, Bharat Dynamics reported a 27% year-on-year decline in FY26 revenue, primarily due to supply chain disruptions and shortages of key overseas components required for defence production.
The brokerage also highlighted a sharp build-up in inventory, which surged 75% year-on-year to ₹46.3 billion as finished products awaited deliveries. While the inventory build reflects delayed execution rather than demand weakness, Goldman Sachs believes it remains a key area investors should monitor.
Despite the operational challenges, the brokerage remains constructive on the company’s long-term demand outlook. It estimates Bharat Dynamics’ FY26 order book at around ₹257 billion, implying a book-to-bill ratio of more than 10 times, reflecting strong visibility for future revenue growth.
Goldman Sachs expects order inflows to remain healthy in FY27 at around ₹140 billion, supported by continued defence procurement and indigenous manufacturing initiatives.
The brokerage has consequently raised its FY27 and FY28 revenue estimates, factoring in execution spillovers from delayed deliveries. However, it cautioned that profitability could remain under pressure as the company increasingly relies on alternate sourcing channels for critical components, potentially leading to higher procurement costs.
Looking beyond FY28, Goldman Sachs also expects competitive intensity within India’s defence sector to rise as private-sector defence manufacturers continue to expand their capabilities and compete for a larger share of government contracts.
While acknowledging Bharat Dynamics’ strong order backlog and favourable long-term industry prospects, the brokerage believes execution risks, supply-chain challenges and margin pressures continue to outweigh the positives at current valuations, leading it to maintain its sell recommendation.
Disclaimer: The views and recommendations are those of Goldman Sachs and do not represent the views of the publication. This article is for informational purposes only and should not be construed as investment advice.