Broker’s call: BEML (Sell)

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Target: ₹3,600

CMP: ₹4,087.10

BEML Q1 revenue rose 10 per cent y-o-y to ₹630 crore, in line with our estimates. We believe mining & construction 43 per cent share and defence & aerospace 19 per cent share in FY24 may have driven top line, with both segments likely witnessing double-digit growth.

Railway & metro 38 per cent share in FY24 revenue may be flat or lower on weak execution due to delay in the Mumbai Metro. Management is focused on execution of the Vande Bharat train. The first trains are likely to be rolled out in Q2-FY25.

Orderbook, as on June 2024, stood at ₹11,820 crore, flat q-o-q, with a book-to-bill of 2.9x of its TTM FY25 revenue. Order inflows fell 66 per cent y-o-y to ₹1,180 crorein Q1-FY25 on delay in receipt of new orders due to elections and the recent announcement of Railways ministry to prioritise non-AC coaches over AC in the Union Budget, resulting in delay in the Vande Bharat coach ordering. Ordering in rail & metro is likely to pick up in H2FY25 on rolling stocks.

We retain our EPS estimates during FY25-26. We introduce FY27. We raise our TP by 11 per cent to ₹3,600 on 32x (from 30x) June 26E P/E to align with defence PSU and improving order inflow visibility in defence. We reiterate Sell as we expect execution challenges in metro and business mix to restrict significant expansion in margin.