Debt-free navratna stock hits 52-week-high, Prabhudas Lilladher says to BUY
Premium- Defence-focused Bharat Electronics Ltd (BEL) is a large cap corporation with a market valuation of ₹62,011.29 crore.
Defence-focused Bharat Electronics Ltd (BEL) is a large cap corporation with a market valuation of ₹62,011.29 crore. The Indian government has given the company Navratna status. BEL now manufactures a variety of cutting-edge products in industries like defence communication, radars, naval systems, C4I systems, weapon systems, homeland security, telecommunications and broadcast systems, electronic warfare, tank electronics, electro-optics, professional electronic components, and solar photovoltaic systems.
Today's closing price for BEL shares was ₹254.60 per share, up 3.71 per cent from the previous close of ₹245.50. On the NSE the stock touched a 52-week-high of ₹260.80 in trade today, whereas a 52-week-low of ₹162.35 was made on 09-August-21, which means that the stock is now trading 56.82 per cent above its 52-week low at the current market price. In order to buy shares of BEL, the brokerage company Prabhudas Lilladher has set a target price of ₹285, which would be a new high for the stock. At the current share price, the brokerage estimates an upside potential of 11.94 per cent for the shares of Bharat Electronics which currently holds a debt-free status as per Value Research.
The brokerage has said in a note that “Bharat Electronics (BEL) reported healthy Q1FY23 performance above our and consensus estimate. Gross margin expanded ~30bps YoY to 41.9% in Q1FY23. EBITDA margin came in healthy at 16.5%, owing to strong revenue growth and better absorption of fixed cost. Order book stands at Rs553.3bn, 3.3x TTM revenue providing revenue visibility going forward. Order pipeline stands strong from Akash weapon system, QRSAM, LRSAM and Naval equipment’s like surveillance system, radars, navigation systems etc."
As per Prabhudas Lilladher “Company has also been focusing on diversifying in non-defense verticals such as EV, metros, electronic warfare, healthcare, homeland security etc. Given healthy order book position and order pipeline, management had guided for revenue growth of ~15% and order inflow of ~Rs200bn with EBITDA margin in the range of 20-22% for FY23. Exports to be ~US$70mn in FY23 vs US$33mn in FY22 (some delays in dispatches were witnessed in FY22, due to geopolitical tension) and capex to be ~Rs5-6bn."
Considering the Q1FY23 performance of BEL, the brokerage has said “Standalone revenue grew ~90% YoY to Rs~31.1bn (PLe ~Rs20.9bn) on low base and healthy order book execution. EBITDA came in at Rs5.1bn vs Rs629mn in Q1FY22 (PLe ~Rs2.3bn) and EBITDA margins coming in at 16.5% in Q1FY23 vs 3.8% in Q1FY22 (low base), owing to better operating leverage. PAT came in at Rs4.3bn (PLe ~Rs1.2bn), led by healthy operational performance and higher other income (up ~258% YoY). Order book stands at Rs553.3bn (3.3x TTM revenue), providing revenue visibility for next couple of years. Given heathy tender pipeline, management had guided for order inflow of ~R200bn in FY23."
“We remain positive on long term growth story of BEL given its strong order backlog, tender pipeline, diversification in newer business verticals like EV battery, Medical equipments, Metro, focus on exports market, government focus on product indigenization etc. We expect revenue and PAT CAGR of 17.5%/18.7% between FY22-24E. The stock is currently trading at 21.3x/18.1x FY23/24E. Maintain ‘Buy’ rating on stock with revise TP of Rs285 (Rs265 earlier) valuing it at PE of 21x FY24E (19.5x earlier), revised upwards due to healthy performance during the quarter," claimed the research analysts of Prabhudas Lilladher.
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