Defense railway PSU stock’s new target price amid strong orderbook collection

PSU stock BEML Ltd bagged multiple orders in recent times with Rs 3,658 crore worth of orders from Chennai Metro, which took its order book to Rs 15,100 crore. As per brokerage analysts, Antique Stock Broking, Railway & Metro business may dominate the revenue profile going ahead, while the Defence business will also be in a sweet spot. The BEML order book composition is turning in favor of better-margin business, it said while suggesting a 'Buy' rating on the stock.

With the fresh order, BEML's contribution to the Railway and Metro segment has jumped to 60 percent of the order book. BEML has consistently increased its revenue from the Railway & Metro and Defence businesses, while the contribution from the weak-margin mining business has seen a decline from 49 percent in FY21 to 41 percent in FY24.

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According to the analysts, the contribution of the mining business is further expected to decline to 30 percent in the medium term, as contributions from the Railway & Metro and Defence segments are expected to reach 70 percent, given that over 90 percent of the order book contribution is from these two segments.

The Railway & Metro (accounting for 61 percent of the order book) and Defence businesses (32 percent of the order book) are superior margin businesses that account for 93 percent of the order book.

The state-run unit has delivered returns for its investors across multiple timeframes. In 2024 so far, the stock has surged by 51%, while it has gained a remarkable 75% over the past year.

Over the past two years, the stock has climbed by 188%, and in three years, it has delivered gains of 210%. Over the past five years, BEML shares have skyrocketed by 414%, rewarding long-term investors handsomely. As of November 28, 2024, BEML, a constituent of the NIFTY 500 index, commands a market capitalization of Rs 17,849.25 crore.

 

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