In the early hours of Tuesday’s trading, Bharat Electronics saw a meteoric rise in its share price, climbing over 8% following optimistic analyses and increased target valuations post the company’s robust Q4 performance. The shares ascended to an unprecedented peak of Rs 283 per share on the NSE, marking an impressive 8.55% surge.
The state-controlled Bharat Electronics Ltd (BEL) reported a 30% augmentation in its consolidated net profit, amounting to Rs 1,797 crore for the quarter concluding on March 31, 2024, up from Rs 1,382 crore in the corresponding period of the preceding year.
The company’s revenue from operations also experienced a notable ascent, expanding by 32% to Rs 8,564 crore, compared to Rs 6,479 crore in the same quarter of the previous fiscal year.
For the March quarter, BEL recorded a turnover of Rs 8,335.01 crore, an increase from Rs 6,327.48 crore in the equivalent period last year.
Throughout the entire fiscal year 2023-24, the Navratna Defence PSU accomplished a turnover of Rs 19,819.93 crore, representing a 14.35% enhancement from the Rs 17,333.37 crore turnover of the preceding year.
Brokerages on BEL
Motilal Oswal’s Perspective on BEL
Motilal Oswal appraises BEL at a 35x P/E on two-year forward earnings, revising the target price to Rs 310 and upgrading the stock to a BUY from its erstwhile Neutral rating. According to Motilal Oswal, Bharat Electronics Ltd (BEL) surpassed expectations in its 4QFY24 results, driven by better-than-anticipated EBITDA margin, PAT, and robust revenue growth. The advancement of order inflows contributed to an overall surpassing of the company’s order inflows.
Motilal Oswal anticipates BEL to be a significant beneficiary of increasing defense indigenization, with the indigenization share in the Indian defense sector persistently rising. BEL’s revenue market share is expected to remain elevated at around 12-13%.
The company is actively endeavoring to augment its share of exports and non-defense revenues. Incorporating higher margins, Motilal Oswal has increased its projections for BEL by 21% for FY25 and 32% for FY26. The valuation multiple has also been elevated to reflect BEL’s larger market share, benefits from technology collaborations, MoUs, and an improving proportion of exports and non-defense revenues in total revenue.
Nomura’s Analysis on BEL
In a report by Nomura, Bharat Electronics Ltd (BEL) has been accorded a ‘Buy’ rating with a target price of Rs 300. The company’s earnings exceeded expectations, propelled by robust margins. BEL’s 4Q EBITDA surpassed Nomura’s estimate by 14%.
The company possesses cash and cash equivalents totaling Rs 110 billion, compared to Rs 80 billion in FY23. Operating cash flow has significantly escalated to Rs 46 billion, up from Rs 11 billion in FY23.
Moreover, BEL’s order backlog stands at Rs 759 billion, which is 3.8 times its trailing twelve months (TTM) sales.
Morgan Stanley’s Take on BEL
According to Morgan Stanley, Bharat Electronics Ltd (BEL) has been rated ‘Overweight’ with the target price elevated to Rs 300. The company’s Q4 FY24 earnings beat was predominantly driven by strong margins, with a full-year FY24 margin of 24.9%, significantly above the 21-23% guidance.
Morgan Stanley anticipates some operational efficiencies to remain steady, prompting them to raise their EBITDA margin estimate to 24-24.5%, up from the previous 22.5-23%.
