Bharat Electronics Ltd stock touches 52-week high 248.20 on Monday, riding on last week’s pace. On 7 April, the Defense Ministry announced the third positive indigenization list of 101 items, of which the company is a beneficiary. This includes weapons, complex systems, equipment and other items that will be procured from local manufacturers to reduce import dependence.
Indigenization of 101 and 108 items was done in the first and second list of the ministry respectively. In a report on April 8, analysts at ICICI Securities said, “Bharat Electronics leads this (third) list with 24 potential orders in the order flow probabilistic calculation.”
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“Higher capital budget and greater thrust towards indigenization will allow for better order book and execution visibility over an extended time frame, and better working capital mobility. Both are dishes for improving the return ratio and multiple expansions,” the brokerage firm said.
At the end of FY 2012, the order book of Bharat Electronics increased by 57,000 crore, representing an increase of about 7% over a year ago. Major orders received included avionics packs for light combat aircraft, advanced electronic warfare suits for fighter aircraft and a mechanized electronic warfare range.
Still, based on provisional numbers, revenue has disappointed slightly with a year-on-year growth of 8.5% in FY12, below the company’s guidance of 10-12% growth due to supply-chain constraints. Revenue of Bharat Electronics 15,000 crore was 4% lower than JM Financial Institutional Securities’ estimate.
Sales growth is set to pick up with strong order books, government focus on local manufacturing, and shift to sustainable alternatives in the automobile industry in non-defense sectors such as lithium-ion batteries and cells.
Investors cheered the growth outlook, with the company’s shares up 16% year over year.
“The environment that India needs to be prepared for amid geopolitical tensions is a factor in the recent rally in Bharat Electronics. The company has been at the top of the defense manufacturing chain. Moreover, with all possible variables such as profitability, exports, etc., there is scope for earnings growth in the medium to long term,” said Amit Mahawar, an analyst at Edelweiss Securities Ltd. Bloomberg data shows that the stock is finance. Is trading at around 20 times estimated earnings for the year 24. All eyes will now be on the performance.
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