Prabhudas Lilladher's research report on Bharat Electronics
We recently attended Q2FY23 analyst call scheduled by Bharat Electronics (BEL), where management sounded confident to meet its FY23 guidance. Order pipeline remains healthy from defence as well as non-defence segment including orders for Akash Prime, HIMSHAKTI EWS (Electronic warfare system), Rudra radar, AMC order for Akash, BMP upgrade, Automated Air Defence Control & Reporting System (ADC&RS) and EW suits for SU-30; while on Civil side orders are expected for Air Traffic Management System, Homeland security, Batteries and E-Mobility segment. Management guided for revenue growth of ~15%, with EBITDA margin in range of 20-22% (23-24% in long run) and order inflows of ~Rs200bn for FY23. We remain positive on long term growth story of BEL given 1) its strong order backlog & order pipeline 2) recent MoU in hydrogen fuel cell, 3) diversification in newer business verticals like, medical equipment’s, hydrogen fuel cell, EV batteries etc., 4) focus on export markets and 5) government focus on product indigenization etc.
Outlook
We expect BEL to report revenue and PAT CAGR of 16.6%/19.1% from FY22 to FY25E. The stock is currently trading at PE of 27.3x/22.8x/19.7x FY23/24/25E. We maintain ‘BUY’ rating on stock with TP of Rs125 (same as earlier) valuing it at 23x FY25E EPS.
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