Buy Bharat Electronics; target of Rs 125: Prabhudas Lilladher

Prabhudas Lilladher's research report on Bharat Electronics

With the recent MoU in EV space, BEL is moving towards its strategy of diversifying into non-defence space (that accounts for ~10% of total revenue; management targets for 25% in long run) likely to be value accretive for the company in long run. We reiterate our positive stance on long term growth story of BEL given 1) its strong order backlog, 2) order pipeline and 3) diversification in newer business verticals like EV battery, medical equipments, hydrogen fuel cell, metro, focus on export markets, government focus on product indigenization etc.

Outlook

We expect BEL to report revenue and PAT CAGR of 16.6%/19.1% from FY22 to FY25E. The stock is currently trading at PE of 27.0x/22.6x/19.5x FY23/24/25E. We roll forward our TP to FY25E with revised TP of Rs125 (Rs98 earlier) valuing it at 23x FY25E EPS. Maintain ‘Buy’ rating.