Buy Bharat Electronics; target of Rs 110: ICICI Direct

ICICI Direct's research report on Bharat Electronics

Bharat Electronics (BEL) reported revenues at Rs 3189 crore, growth of 16.3% YoY, above our estimate of Rs 2502 crore on the back of normalising supply chain, Ventilator order and business operations leading to execution pick-up. Absolute EBITDA for the quarter was at Rs 623.4 crore (vs. our estimate of Rs 329.4 crore) up 14.4% YoY. EBITDA margin was better than estimate at 19.6% (above our estimate of 13.2%) down marginally by ~30 bps YoY, owing to controlled operating expenses, better than expected execution. Hence, PAT came in at Rs 397 crore, up 16.9% owing to better execution, higher other income, which grew 82% to Rs 27 crore on a YoY basis.

Outlook

We revise our target price to Rs 110 (13.5x on FY22E EPS) and change our rating from HOLD to BUY. Any disappointment on execution front may significantly impact the operating performance of BEL.

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