LKP Research is bullish on Bharat Electronics has recommended buy rating on the stock with a target price of Rs 132 in its research report dated August 13, 2020.
LKP Research's research report on Bharat Electronics
BEL reported earnings which were better than our expectations at Rs541 mn, against our expectations of a loss. Revenues de-grew by 19.7%/71.4% yoy/qoq to Rs16.4 bn, which were above our expectations as the company executed the ventilators order of Rs4 bn in the quarter. Ex-ventilators, the revenues dropped by 40% yoy. LRSAM, Smart City business, Intelligence Gathering Systems, Thermal Imaging Cameras and Radar repairs were the other revenue contributors in Q1. Reduction in RM to sales at 49.3% led to gross margin expansion at 50.7%. EBITDA margins came in at 8.8% which were down by 780 bps yoy, but were still better than our expectations of operational loss, on gross margin beat. PAT as a result of this came in at Rs541 mn, which was better than streets estimate. In Q1, the company delivered 10,000 ventilators for Rs4bn, while has an order of 20,000 ventilators @ Rs8bn to be supplied in Q2. In Q1, the companys order book was increased by Rs34 bn (72% up yoy), which took the total order book up to Rs538 bn (4.2x FY20 sales).
Outlook
We maintain BUY rating on the stock and target price of Rs132, based on 14x P/E FY22E. We believe BELs diversified product portfolio and strong opportunity pipeline will keep it ahead of its peers.
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