Defense-focused Bharat Electronics Limited (BEL) is a large cap corporation with a market valuation of 62,011.29 crore. The Government of India has given Navratna status to the company. BEL now manufactures a variety of state-of-the-art products in industries such as defense communications, radar, naval systems, C4I systems, weapon systems, homeland security, telecommunications and broadcasting systems, electronic warfare, tank electronics, electro-optics, professional electronic components, and Is. Solar photovoltaic system.
Today’s closing price of BEL shares was 254.60 per share, up 3.71 per cent from previous close 245.50. Shares touch 52-week high on NSE 260.80 in trading today, while the 52-week low of 162.35 was made on 09-August-21, meaning the stock is now trading 56.82 percent above its 52-week low at the current market price. Brokerage company Prabhudas Lilladher has set a target price to buy BEL shares. 285, which would be a new high for the stock. At the current share price, the brokerage estimates a growth potential of 11.94 per cent for the shares of Bharat Electronics, which currently holds debt-free status as per Value Research.
The brokerage said in a note that “Bharat Electronics (BEL) has outperformed our and consensus estimates in the first quarter of FY13. Gross margin grew ~30bps YoY to 41.9% in Q1FY23. EBITDA margins remained healthy at 16.5 per cent, driven by strong revenue growth and better absorption of fixed costs. The order book is Rs.553.3 billion, 3.3x TTM revenue which provides further revenue visibility. The order pipeline from Akash Weapon System, QRSAM, LRSAM and Naval Equipment like Surveillance System, Radar, Navigation System etc. is strong.”
According to Prabhudas Lilladher “The company is also focusing on diversifying into non-defense verticals like EV, Metro, Electronic Warfare, Healthcare, Homeland Security etc. Given the healthy order book position and order pipeline, the management has achieved a growth of ~15 Had guided for revenue growth. Order flow of ~200 billion with EBITDA margin in the range of 20-22% for FY23. Exports in FY23 were ~US$70mn versus US$33mn in FY22 (FY22 due to geographic stress) observed some delay in dispatch) and the capex should be ~Rs5-6bn.
Taking into account BEL’s Q1FY23 performance, the brokerage has stated that “Standalone revenue grew by ~90% YoY to ~31.1bn (PLe ~Rs20.9bn) on a lower basis and healthy order book execution. EBITDA Q1FY22 (PLe ~Rs2.3bn) at Rs5.1bn vs Rs629mn and EBITDA margin came in at 16.5% in Q1FY23 vs 3.8% in Q1FY22 (Low Base), on account of better operating leverage, healthy operating performance and higher other income (~ PAT came in at Rs.4.3bn (PLe~1.2bn) led by 258% YoY. The order book stands at Rs.553.3 billion (3.3x TTM revenue), providing revenue visibility for the next few years. Strong tender pipeline Given that, the management had guided for an order inflow of ~R200bn in FY23.”
“We remain positive on the long-term growth story given BEL’s strong order backlog, tender pipeline, diversification into new business verticals like EV Battery, Medical Equipment, Metro, focus on export market, Government’s focus on product indigenization etc. . We expect revenue and PAT CAGR of 17.5%/18.7% between FY22-24E. The stock is currently trading at 21.3x/18.1x FY23/24E. Maintain ‘Buy’ rating on the stock with revised TP of Rs 285 (earlier Rs 265), evaluate it at PE of 21x FY24E (19.5x earlier), revised upwards due to healthy performance during the quarter,” said Prabhudas Lilladher research analysts claimed.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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