Shares of Bharat Electronics (BEL) jumped 6 percent on July 18 after the company reported a 15-fold spurt in its net profit for the first quarter.
The company said its total consolidated revenue from operations nearly doubled to Rs 3,140.61 crore during the quarter ended June. It secured a profit of Rs 366.33 crore - up from Rs 24.41 crore in the same quarter last year.
Following the update, the stock traded at Rs 260.15, up 6 percent on the BSE.
Morgan Stanley said the performance was a large beat led by revenue. The broker said their assumptions are in line with guidance. It sees that there are likely to be upside risks to FY23 earning estimates now.
Morgan Stanley maintained ‘overweight’ rating on the stock with a target at Rs 260, which has already been met.
ICICI Securities also maintained the 'buy' rating with a target price at Rs 300.
The broker pointed out that gross margin (excluding other operating incomes) had bottomed out in Q3 of FY22 and since then charted a recovering trend. The same has been offset by an increase in fixed costs, leading to a decline in EBITDA margin. “Likely, execution will pick up to restore the EBITDA margin trajectory, as underlined in the management guidance,” it said.
In the first quarter, order inflows were muted, but given the underlying trend in defense spending and the projects in the order pipeline, analysts do not see risks for Bharat Electronics garnering Rs 110,000 crore of defence orders over the next five years.
Another emerging avenue of revenue for Bharat Electronics is exports, said ICICI Securities, who underlined that export revenue has nearly doubled on-year in FY22.
"Large export orders were booked from Airbus, as a follow-through of C295 transport aircraft orders from IAF (to Tata Airbus consortium). We also see a significant possibility for BEL as HAL emerges as the top contender for many global air force tenders," it said.
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