Target: ₹3,345

CMP: ₹2,869

We initiate coverage on BEML with a ‘Buy’ rating at a target price of ₹3,345, valuing it at a P/E of 26x FY26E. BEML is in a sweet spot to capitalise on “Make-in-India” and the country’s flourishing metro, railway & defence capex story led by defence order pipeline of ₹40,000 crore, near-term order potential of ₹10,000 crore+ in metro projects, ₹36,500 crore+ opportunity in rolling stock for Vande Bharat trains and healthy order book (₹12,400 crore) with ₹800 crore capex planned to ramp up execution.

Modernisation of India’s defence capabilities has been a core focus of the government in recent years in order to ensure a combat-ready nation given the precarious nature of its relations with neighbors Pakistan & China. In order to secure the country’s vast borders with these nations, it is imperative to equip border forces with ample supplies, ammunition and equipment.

High Mobility Vehicles (HMVs) and Armoured Recovery Vehicles (ARVs) manufactured by BEML play a key strategic role in achieving this.

We estimate Revenue/Adj. PAT CAGR of 16.4/50.3 per cent over FY23-26, with significant margin expansion of 420 bps owing to revenue scale-up and falling manpower. The stock is currently trading at a P/E of 29.4x/22.3x on FY25/26E earnings.