Target: ₹4,004

CMP: ₹3,777.05

We revise our FY25 EPS estimate down by 2.6 per cent factoring in execution of a lower than expected order book and downgrade the rating to ‘Accumulate’ from Buy with a revised TP of ₹4,004 (₹3,345 earlier) given the sharp run up in stock price.

BEML reported mixed quarterly performance with a big miss on revenue (9.1 per cent y-o-y to ₹1,510 crore) and EBITDA margin expansion of 381bps y-o-y. Although FY24 order inflows were softer than expectations, the company has a significant opportunity pipeline in rail & metro worth ₹58,000 crore in FY25 and ₹32,000 crore in FY26 which can boost the order book.

Prospects include metro cars in Mumbai, Chennai, Patna, among others, as well as Vande Bharat rolling stock. It also has a defence order pipeline of ₹40,000 crore over the next 4-5 years across HMVs, ARVS, combat engineering equipment, tank engines, etc.

BEML is in a sweet spot to capture long-term growth on the back of strong railway & defence capex in India; healthy order prospects in modernisation of defence vehicles (HMVs, ARVs, etc.); large tender pipeline for metro & Vande Bharat rolling stock; and ramp up in margins on account of scale-up in execution.

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