Multibagger Bharat Electronics share price: 4 key reasons why UBS has downgraded the stock despite strong Q1 performance

Stock Market today: Multibagger Bharat Electronics (BEL) share price remained range bound in morning trades on Tuesday despite strong Q1 earnings performance. Bharat Electronics (BEL) share price has risen almost 146% in last one year having given Multibagger returns to the investors. The Bharat Electronics (BEL) Q1 show also remained strong with net profit rising 47% year-on-year while revenue increased 20% year-on-year. The earnings before interest tax depreciation and amortisation also grew 41% year-on-year.

Despite strong performance UBS has downgraded the stock to Neutral rating. Here are key reasons

1.Limited scope for surprises

UBS Research says that rise in Bharat Electronics (BEL) share price has largely been driven by a 70% higher order intake (FY24) versus management guidance. Earnings upgrades during the period were 13%, reflecting a strong valuation re-rating. Based on consensus and UBS estimates, Bharat Electronic share price factors in a healthy Rs30000-34000 Crore per year new order run rate (versus ₹25000 Crore previously), 19% top-line and Ebitda CAGR (Compound annual growth rate) during FY24-27 and 12-month-forward Price to earnings of 48 times, leaving little room for a positive surprise

2.Large ticket orders remain key

Based on its bottom-up new order pipeline, UBS's new order estimate for FY25-27 at 3.4% during FY24-27 CAGR, is higher than consensus factoring flattish order growth. This implies Rs7600 crore higher orders over the next three years, says UBS. Also while base orders could continue for BEL, timely closure of large-ticket orders remains key for it to sustain a higher 19% top-line CAGR (compound annual growth rate) versus 11% to 12% in the past 5/10 years says UBS Research.

3.HAL better placed that BEL-

BEL management's guidance of a 15% top line and a ₹25000 Crore order run rate seems fairly achievable, as per UBS. However, UBS does not see major upside to that and intend to seek greater clarity on timelines for larger platforms such as QRSAM (quick-reaction Surface to air missile system) and future Akash orders, etc. UBS still believes that HAL presents better new order growth potential than BEL in the next 12-24 months.

4.Valuations limit upside

UBS Research while remains directionally constructive on Bharat Electronics (BEL) earnings and order book growth, they believe the stock's medium-term growth potential is priced in. They downgrade their rating to Neutral, while raising our price target from Rs333 to Rs340, based on an unchanged target Price to earnings ratio of 40 times on 12-month-forward earnings as of July 2025. UBS also retains its above-consensus earnings and new order assumptions.

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