Buy Bharat Electronics; target of Rs 119: LKP Research

LKP Research's research report on Bharat Electronics

BEL reported earnings of ₹5.98 bn, against a yoy profit of ₹5.83 bn while sequentially it was down by 2% on a high base of Q2. Revenues grew by just 4.7% qoq and 11.8% yoy at ₹41.3 bn. EBITDA de-grew by 0.3% qoq while growing by 3.8% yoy at ₹8.53 bn. On the margins front, EBITDA margins came in at 20.7% which were 100 bps down qoq and 160 bps down yoy. The order book now stands ~₹501 bn providing strong visibility of ~4.4x of TTM revenues. BEL added ~₹36 bn of orders in 9M of FY23 and targets to add ~₹170 bn in Q4 alone on the back of huge order pipeline.

Outlook

On the back of decent topline and margin performance, huge cash surplus, comfortable WC cycle and rich return ratios, we maintain our BUY rating on the stock with a TP of ₹119 (22x rolled over FY25E earnings).

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