Bharat Electronics Ltd.'s (BEL's) 1QFY20 performance was below our expectations. Revenue was flat on YoY basis which we believe could be due to weak execution on account of general elections during the quarter. EBITDA margin at 16.6% was way below guidance of 19-20% for the full year, impacted due to weak execution and higher employee cost. Hence, PAT for the quarter was up 14% YoY at Rs2 bn (PLe Rs3 bn). Order inflow during the quarter was down 45%YoY at Rs~20 bn (FY20 guidance Rs70 bn). Major orders expected during FY20 are Akash Missile System (7 Sqdn) (Rs50 bn), Coastal Surveillance System (Rs15 bn) and Samyukta Upgrade (Rs5 bn). We have broadly maintained the numbers as we expect execution to pick up in subsequent quarters of the current financial year.
OutlookThe stock is currently trading at 12.7x/11.8x FY20/21E. We maintain Accumulate on the stock with TP of Rs120.
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