Anand Rathi initiates coverage on Bharat Electronics with 'buy' rating

Brokerage house Anand Rathi has initiated its coverage on Bharat Electronics Limited (BEL) with a 'Buy' rating. It has a target price of Rs 243 for the stock.

The stock ended 0.94 per cent higher at Rs 199.20 on Wednesday against the previous close of Rs 197.35 on the BSE. With a market capitalisation of more than Rs 48,500 crore, the shares stand higher than 200 day moving average but lower than 5 day, 20 day, 50 day and 100 day moving averages.

Anand Rathi said that the future of the company looks promising. Besides, the defence sector is being opened up for private sector participation with the evolution of Defence Procurement Procedure. 

It highlighted that the order book of the company as on December 31, 2021 stood at around Rs 56,000 crore. The order book comprises major programmes like Long Range Surface-to-Air Missile System (LRSAM), Akash Missile Systems, Command and Control System, Battle Field Surveillance Systems, Fire Control Systems, Software Defined Radios, Coastal Surveillance Systems, Advance Composite Communication System, Naval Systems, Electronic Warfare Suite, etc.

The brokerage house further added that BEL is targeting a healthy growth of 12-15 per cent and the management is confident of maintaining margins around 20-22 per cent for FY2022E despite higher commodity prices as it has a strong indigenous portfolio of products which has reduced dependence on imports and other commodity prices. 

The non-defence segment businesses like homeland security, smart cities, EVMs and other diversification areas will also contribute to the growth of the company.

Recently, BEL and Hyperion Global Group, LLC, an infrastructure telecommunication distribution company based in the US, entered into a contract to develop, manufacture and supply Internet of Things (IoT) devices for the US market.

As per the contract signed on January 21, 2022, BEL will manufacture and supply IoT devices worth $73 million to Hyperion during the first year of commencement of supply, with a provision to negotiate and supply upgrades of the products worth $365 million in the next five years.

In January 2022, the defence PSU appointed Shyama Singh as non-official director (independent director) on the board.