Prabhudas Lilladher's research report on Bharat Electronics
We recently attended Q4FY23 analyst call scheduled by Bharat Electronics (BEL), wherein management highlighted FY24 order pipeline remains strong from orders such as Akash Missile system, equipment for shipbuilding, Electronic warfare system etc. FY23 order inflows came in at ~Rs206bn (up 8% YoY), comprising of Himashakti, Medium Power Radars, Air Defence Control & Reporting System etc. Order book stands strong at ~Rs606.9bn (3.5x FY23 revenue). Exports revenue came in at US$46.5mn in FY23 (up 40%) and management targets for US$90-100mn for FY24. BEL incurred ~Rs10bn on R&D (~6.2% of revenue) vs Rs10.5bn in FY22 (6.8% of revenue). Management guided for revenue growth of 17% owing to strong execution and order inflow of Rs200bn+ (excluding large order such as QRSAM, MRSAM etc. which may come in Q4FY24 or Q1FY25), with EBITDA margin in range of 21-23% for FY24. We remain positive on long-term growth story of BEL given 1) strong order backlog & order pipeline 2) diversification in newer business verticals like, medical equipment’s, hydrogen fuel cell, EV batteries etc., 3) focus on export markets (Egypt, Malaysia etc.) and 4) govt’s focus on product indigenization.
Outlook
We expect Revenue and PAT CAGR of 16.7%/15.1% between FY23-FY25E. The stock is currently trading at PE of 23.5x/20x FY24/25E. Maintain ‘BUY’ with TP of Rs125 (same as earlier) valuing it at 23x FY25E EPS.
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