Shares of Bharat Dynamics Ltd (BDL) fell as much as 19% to hit an intraday low of Rs 1,222.35 apiece on NSE in early deals on August 12 after the company's fiscal first quarter net profit fell 83% year-on-year to Rs 7.2 crore. Its net sales declined 36.5% YoY to Rs 188 crore, impacted by supply chain issues due to the ongoing Russia-Ukraine war and conflicts in the Middle East region.
Bharat Dynamics' Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) came in at a loss of Rs 52.3 crore in Q1FY25, which was higher than the loss of Rs 32.6 crore reported during the same quarter last year.
Its gross margin improved to 83%, led by inventory changes. Despite the EBITDA loss, the state-run defence company managed to hold on to profitability for the quarter aided by a higher interest income due to a strong cash balance.
The company informed that it had no major order wins during the June quarter, adding that the ongoing Russia-Ukraine War, along with the Middle-East conflict continued to affect the supply chain leading to a delay in receipt of key components, which impacted the company's quarterly performance.
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Bharat Dynamics management believes that these issues should be resolved by the later part of Q2FY25.
At 10:49 am Bharat Dynamic shares had recouped losses partially and were trading nearly 7% lower at Rs 1,336 apiece on the National Stock Exchange (NSE). So far this year, the stock has gained around 55%, outperforming benchmark Nifty's returns of around 12%.
In the 12 months gone by, the PSU multibagger stock has delivered stellar returns of around 140%, more than doubling investors' money. In comparison, Nifty rose 25 % during this period.
Antique has maintained its "buy" recommendation Bharat Dynamics stock with a price target of Rs 1,641, saying that execution normalisation will be the key for further re-rating of the stock.
The brokerage expects the PSU to deliver strong operational performance and achieve revenue growth in FY25 aided by supply challenges easing out and multiple measures taken to address alternate supply chain.
ICICI Securities upgraded the stock to 'buy' from 'add' rating earlier with a target price of Rs 1,745. The brokerage expects Bharat Dynamics' performance to improve by H2FY25 as management envisages most of the issues to get ironed out by the later part of Q2FY25.
In its recent interaction with investors, BDL management outlined its focus on improving share of exports to ~25% (now 10%), increasing R&D spend to 9% of revenue (now 4%), and ensuring better inventory management.
Analysts at ICICI Securities expect a yearly order inflow of Rs 1500–2000 crore, apart from the large orders of Rs 15,000–20,000 crore every 3–4 years. Its order book, as on end-FY24, stood at Rs 19,500 crore, implying book/bill of 8.2x ttm.
"We remain positive on management’s previous guidance of doubling revenue over the next five years and reaching Rs 10,000 crore in the next ten years," they said.
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In ICICI Securities' view, the recent price erosion in Bharat Dynamics stock is an opportunity to 'buy' as medium-term prospects remain solid with the Indian government making attempts to boost the rocket force.
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