Bharat Electronics stays top defence pick

Bharat Electronics Limited (BEL) remains Motilal Oswal's top pick in defence, the brokerage said in a report on October 5. It cited Defence Acquisition Council (DAC) approvals worth about ₹13 lakh crore from FY25 to date as a key driver of the sector's order pipeline. The latest DAC round cleared proposals worth over ₹1.1 lakh crore, with about 98% reserved for Indian industry. That takes FY27 approvals so far to about ₹1.62 lakh crore. Motilal Oswal sees BEL as a likely beneficiary of radar, electronic warfare and surveillance contracts. These include Arudhra radars for the Navy and ground-based multi-purpose jammers for the Air Force. The brokerage's last stated target for BEL was ₹530, based on 45 times two-year forward earnings, in its September 8 note. Against the October 1 close of ₹383.10, that implies upside of about 38%. However, approvals are not orders. Acceptance of Necessity (AoN) clearances only start the procurement process, and conversion into signed contracts can take years. The stock has moved the other way since the approvals. At the September 8 target, Motilal Oswal implied 30.7% upside, which puts the price then near ₹405. BEL has since slipped to about ₹383, despite the positive commentary. The market wants actual order wins and execution, not just a larger pipeline. BEL has also closed its trading window ahead of Q2 FY27 results. Investors should watch for fresh order wins, the speed at which AoN approvals turn into contracts, execution and margins in Q2 FY27 results, and the order book update. The key question is whether BEL can turn a record approval pipeline into faster order inflows. Disclosure: I do not hold any position in Bharat Electronics Limited. This post is for informational purposes only and is not investment advice.