Prabhudas Lilladher has given Buy recommendation for Bharat Electronics with a target price of Rs. 125 in its research report issued on Oct 27, 2022
Prabhudas Lilladher’s research report on Bharat Electronics
Bharat Electronics (BEL) results were broadly in-line with estimates. BEL reported revenue of Rs39.5bn (up 7.8% YoY) and PAT came in at Rs6.1bn (flat YoY) in Q2FY23. H1FY23 EBITDA margin improved 204bps YoY to 19.4%, owing to better absorption of fixed overheads. Order inflows came in at ~Rs13.6bn (down 49.3% YoY) in Q2FY23, while order book stood at ~Rs528bn (3.1x TTM revenue), providing revenue visibility for next couple of years. Order pipeline stands strong from Akash weapon system, QRSAM, LRSAM and Naval equipment’s like surveillance system, radars, navigation systems etc. Company has been focusing on diversification in non-defense verticals such as EV, metros, electronic warfare, healthcare, homeland security etc. Moreover, BEL recently signed a MoU with Triton Electric Vehicle Pvt. Ltd (TEV) for manufacturing Hydrogen Fuel cells, with technology transfer from TEV. BEL also bagged order worth Rs80.6bn from Triton Electric Vehicle India Pvt Ltd. (in Q3FY23), for supplying Li-Ion Battery Packs. Earlier management guided for revenue growth of ~15%, with EBITDA margin in range of 20-22% 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, 4) diversification in newer business verticals like, medical equipment’s, hydrogen fuel cell, EV batteries etc., 5) focus on export markets and 6) 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 27.5x/23x/19.8x FY23/24/25E. We maintain ‘BUY’ rating on stock with TP of Rs125 (same as earlier) valuing it at 23x FY25E EPS.