Buy Bharat Electronics; target of Rs 170: ICICI Direct
ICICI Direct is bullish on Bharat Electronics recommended buy rating on the stock with a target price of Rs 170 in its research report dated January 07, 2021.
January 14, 2021 / 08:52 PM IST
ICICI Direct's research report on Bharat Electronics
Bharat Electronics (BEL) is expected to ramp up on the execution front in coming years given strong order book size and robust order inflow pipeline over the next couple of years. BEL’s strategy to diversify its revenue stream to non-defence segments would de-risk its business given concentrated exposure to defence budgets likely to auger well in long term. BEL is expects to deliver double digit revenue growth over the next two years along with sustained margins at current levels of 20-21%. It expects services to contribute ~10% of revenue in FY21E and gradually to increase to ~25% of revenue over the next five years growing at a CAGR of 10-15%. Overall, diversification strategy, expected double digit growth, sustainable margins and better order inflows suggest a strong performance in the long term.
We introduce FY23E estimates and expect BEL to report revenue, EBITDA, PAT CAGR of 11.6%, 10.4%, 10.2%, respectively, in FY20-23E. We revise our target price from Rs 110 to Rs 170 (17x on FY23E EPS) and maintain BUY rating.
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