Even as broader indices were down on Monday, the shares of public sector firms BEML and Bharat Electronics (BEL) continued to gain. BEML remained locked in 20 per cent upper circuit (only buyers and no sellers in its shares) for most of the day, and closed with gains of 19.94 per cent. BEL, too, ended the day in the green, adding to the over 20 per cent gains it has seen from end-March lows.

The PSU companies, with strong order books and robust balance sheets, are well placed to see operations streamlined and growth return as the disruption led by the Covid-19-triggered lockdown eases. Analysts, such as Arafat Saiyed at Reliance Securities, say these companies will benefit further as they are likely to see order flow pushed up by equipment required to fight Covid-19.

While BEL is working on the manufacturing of ventilators, BEML is likely to get orders related to railway sanitisation works and hence, both companies remain well placed to gain, say analysts.

The firm business prospects of BEL, a defence order supplier, remain unaffected by the current disruption. With long-range surface-to-air missile system (LRSAM) orders in the execution stage, analysts remain positive on the company’s earnings prospects.

BEL, in its communication to the exchanges recently, had said it ended FY20 with a record turnover of over Rs 12,500 crore, up 6 per cent year-on-year (YoY). Analysts say, adjusted for the VVPAT/EVM revenue of Rs 2,600 crore in FY19 ahead of the general election, FY20 revenues grew 35 per cent YoY. This despite some impact on the execution in the March 2020 quarter. Analysts say for Q4FY20, the implied execution for BEL was likely at Rs 5,730 crore (up 48 per cent YoY) and was ahead of expectations. The large order flows related to defence projects, which are driving execution, are likely to keep the pace firm in the future, too.

Analysts at Motilal Oswal Financial Services say BEL has demonstrated a strong execution capability over the years and is well placed in the current troublesome time of Covid-19. The company —having received orders worth Rs 13,000 crore in FY20 — has an order book of Rs 51,800 crore now. This gives high revenue visibility with order book being four times the FY20 turnover.

Meanwhile, BEML is already seeing its prospects being driven by defence and railway projects (metro rail, in particular). Further, with mining leases being renewed, mining equipment is likely to see an uptick in demand. The expected order flow from the Railways to gear up for challenges posed by Covid-19 is likely to be an additional driver. BEML has already seen strong order inflow momentum pertaining to metro coach manufacture (including Mumbai, Delhi, Kolkata and Bengaluru) and the Mumbai order alone constitutes roughly 30 per cent of the current order book. Trailing 12 months order inflow growth of 179 per cent YoY till the end of December had already provided confidence of improved execution, say analysts.

Overall, analysts see metro rail projects and the defence segment to be key growth drivers for BEML moving forward.

Even after the recent gains, the two stocks trade at decent valuations, feel analysts, as the share prices are still down by up to 40 per cent compared to January highs.