Buy Bharat Elec; target of Rs 1738: Firstcall Research

“Bharat Electronics Limited (BEL) was established at Bangalore, India, by the Government of India under the Ministry of Defence in 1954 to meet the specialized electronic needs of the Indian defence services. The company is a multi-product, multi-technology, multi-unit company serving the needs of customers in diverse fields in India and abroad. BEL has also diversified into civilian areas. Some of the successful civilian products include the Electronic Voting Machines, Solar Powered LED-Based Traffic Signal Lights, and Simputers & Set Top Boxes. BEL offers contract-manufacturing services for both domestic and international customers. It has automated assembly, inspection and testing facilities as also precision machining capabilities. It adheres to strict process and manufacturing standards, producing world-class products. BEL has its corporate office at Bangalore and manufacturing units at nine locations in India. A network of marketing and customer support centers across India completes the vertically integrated company profile.”

“Bharat Electronics Ltd. has reported net profit of Rs 1250.10 million for the quarter ended on September 30, 2011 as against Rs 1040.70 million in the same quarter last year, an increase of 20.12%. It has reported net sales of Rs 10823.17 million for the quarter ended on September 30, 2011 as against Rs 9778.94 million in the same quarter last year, a rise of 10.68%. Total income grew by 17.00% to Rs.12235.73 million from Rs.10457.68 million in the same quarter last year. During the quarter, it reported earnings of Rs 15.63 a share.”

“At the current market price of Rs.1512.00, the stock is trading at 12.52 x FY12E and 11.44 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.114.89 and Rs.125.66 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 6% and 12% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 8.22 x for FY12E and 7.54 x for FY13E. Price to Book Value of the stock is expected to be at 1.95 x and 1.66 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 1738 for long term investment,” says Firstcall Research report.

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