Hold Bharat Electronics; target of Rs 1850: Sharekhan

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Sharekhan research has recommended hold rating on Bharat Electronics with a target of Rs 1850, in its November 27, 2008 report.

"Bharat Electronic (BEL's) order book stood higher at Rs12,500 crore at the end of H1FY2010 as compared to Rs10,386 crore as on March 31, 2009. The current level of order book is 2.7x its FY2009 revenue and provides strong revenue visibility at least for the next two years. The order intake also improved to Rs4,329 crore during H1FY2010 (versus Rs5,424 crore in FY2009). We do not see any business challenges for BEL in the near to medium term and expect a continuous order flow on a 34% year-on-year increase in the defence capital outlay in the Union Budget 2009-10. We have revised our price target to Rs1,850 on the back of the higher valuation multiple of 11x its FY2011E earnings estimate on account of strong intake in H1FY2010, which is 80% of the total order intake in FY2009. We continue to consider our cash per share estimate of Rs 482 in our price target."

"BEL's stock has outperformed the benchmark Sensex (the stock rose 23% since September 01, 2009 versus 8.4% increase in the Sensex). At the current price, we see limited upside potential to our price, hence we are downgrading the stock to Hold and recommend investors to partially book profits. At the current market price, the stock trades at 14.6x FY2010 and 13.7x FY2011 earnings estimates. BEL is a cash rich company with cash per share of Rs 330 in FY2009. On an adjusted earnings (adjusted for cash) basis, the company trades at 11.5x FY2010E and 9.8x FY2011E."

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