Prabhudas Lilladher has given Buy recommendation for Bharat Electronics with a target price of Rs. 265 in its research report issued on May 23, 2022
Prabhudas Lilladher’s research report on Bharat Electronics
Bharat Electronics (BEL) reported revenue of Rs63.2bn in Q4, down 8.4% on high base. FY22 revenue grew 8.9% at Rs153bn, while EBITDA margins came in at 21.6% in line with management guidance. Order inflow came in at Rs181bn up 17.2% in FY22, translating to order book of Rs576bn. Order pipeline stands strong from Akash weapon system, QRSAM, LRSAM, Naval equipment’s like surveillance system, radars, navigation systems etc. providing order inflow visibility going forward. BEL targets to increase its exports share in defense products (to be ~10-15% of total revenue) for revenue growth in long run. With a view to reduce its dependence on defense segment, company has been focusing on diversifying in non-defense verticals such as EV, metros, electronic warfare, healthcare, homeland security etc. Within metro segment BEL is developing communication based train control system, expected to be completed in next 18 months having opportunity size of Rs70bn from ongoing metro projects.
We remain positive on long term growth story of BEL given its strong order backlog, tender pipeline and diversification in newer business verticals like EV battery, Medical equipment’s, 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 20.1x/17x FY23/24E. Maintain ‘Buy’ rating on stock with TP of Rs265 (Rs258 earlier) valuing it at PE of 19.5x FY24E.