Debt free Navratna stock hits 52-week-high, Brokerages are bullish for new high
Premium- A Navratna PSU under the Indian Government's Ministry of Defence is Bharat Electronics Limited (BEL).
A Navratna PSU under the Indian Government's Ministry of Defence is Bharat Electronics Limited (BEL). For the Army, Navy, and Air Force, the company produces cutting-edge electronic systems and equipment. According to Value Research's statistics, the company is debt-free. After hitting a 52-week-high of ₹270.10 on the NSE, the shares of Bharat Electronics closed today at ₹266.90 apiece level, down by 0.67% from its previous close. On 09-August-21, the stock reached a 52-week low of ₹162.35; hence, at its current price of ₹266.90, it is trading 64 per cent above its 52-week low. Even brokerage houses ICICI Securities and Prabhudas Lilladher are bullish on the stock. The fresh possible highs for the stock have been established by ICICI Securities at a target price of ₹315 and Prabhudas Lilladher at ₹295 respectively.
Prabhudas Lilladher has said in a note that “Management in its recent conference call highlighted that FY23 order pipeline remains healthy, with expected orders such as Akash missile system, warfare system, radars, naval fire control system etc. and the company expects to bag orders worth ~Rs200bn. Given robust order book (Rs553.3bn, 3.3xTTM revenue), management guided for revenue growth of ~15% with EBITDA margin in range of 21-23% for FY23. Exports opportunity stands strong and management expect to bag orders of ~US$400-450mn in FY23 vs US$180mn in FY22. Company has also been focusing on diversifying in non-defense verticals such as EV, metros, electronic warfare, healthcare, homeland security etc. Capex of ~Rs30bn has been planned for capacity expansion of which Rs20bn has already been completed and ~Rs10bn is expected to be incurred in FY23."
“We remain positive on long term growth story of BEL given 1) its strong order backlog, 2) order pipeline and 3) diversification in newer business verticals like EV battery, Medical equipments, Metro, focus on exports market, government focus on product indigenization etc. We have revised our earnings estimate by 1.9%/3.4% for FY23/24 factoring in higher other income. The stock is currently trading at 22.9x/19.1x FY23/24E. Maintain ‘Buy’ rating on stock with revised TP of Rs295 (Rs285 earlier) valuing it at PE of 21x FY24E (same as earlier)," said the research analysts of Prabhudas Lilladher.
“Overall, expected double digit revenue, order inflow growth, sustained margins and strong order book to ensure better performance. We remain long term positive and retain our BUY rating on the stock. We value BEL at ₹315 i.e. 25x P/E on FY24E EPS," said ICICI Securities.
As per ICICI Securities, the key triggers for future price performance of BEL are strategy to diversify into non-defence areas, focus on increasing exports and services share would aid long term growth and help de-risk its business, strong order pipeline in FY23-24E, we expect revenue, EBITDA to grow at a CAGR of ~16.8%, 16.3%, respectively, in FY22-FY24E aided by sustained margins in range of 21-22% and strong balance sheet, double digit returns ratios.
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