52% upside target! Railway and defence PSU stock to buy on strong FY27 visibility

Elara Securities has cut its target on BEML Ltd. Yet it sees a solid 52 per cent upside on the railway and defence PSU stock, citing strong growth visibility in FY27. The inflow pipeline is robust, Elara said as the brokerage sees BEML clocking revenue growth of 15-25 per cent over the next three years. Key risks for BEML include supply chain constraints on the castings and components front, which Elara said could drag execution.

The brokerage has cut its earnings estimates by 2 per cent for FY27, 4 per cent for FY28, and 10 per cent for FY29 on account of supply chain constraints, likely dragging execution.

“Hence, we cut our target to Rs 2,620 from Rs 2,700. But we retain Buy, due to revenue acceleration in FY27, robust order inflows visibility, scope for margin improvement, and unexplored exports potential,” Elara said. The target suggests 52 per cent upside for BEML.

It sees earnings for BEML growing at of 83 per cent during FY26-29E, with an average return on equity (ROE) and return on capital employed (ROCE) of 20 per cent and 19 per cent, respectively, during FY27-29E.

Executable orderbook
BEML has outlined an executable orderbook of Rs 5,500 crore for FY27, and is targeting a sales growth of 15-25 per cent for the next three years, on account of healthy L1 pipeline in mining, which is expected in the upcoming months, along with ramp-up in execution of key projects in Rail & Metro (R&M) – Mumbai Metro, Bengaluru Metro, Vande Bharat sleeper trains, and Linke-Hofmann-Busch (LHB) coaches. 

“The R&M segment is set to contribute Rs 2,000 crore sales in FY27, which would be a jump of 100 per cent YoY. The defence segment revenue expectations is Rs 1,500-1,700 crore for the year. Management expects R&M and defence to contribute 57-58 per cent of sales in FY27. The exports orderbook is likely to commence execution this year,” Elara pointed out. 

The growth momentum is seen continuing during FY28-29 once R&M execution ramps up. The exports order pipeline is increasing, with BEML receiving its first-ever order for metro rolling stocks exports in Q4FY26. BEML expects R&M and defence to contribute 57-58 per cent of sales in FY27.