Buy Bharat Electronics; target of Rs 215: Motilal Oswal

Motilal Oswal's research report onBharat Electronics

BHE plans to spend INR25b over the next 3 -4 years (INR5b -6b annually) on modernization of its facilities and capacity expansion. Key projects include: (a) setting up a missile/defense systems integration complex (INR5b) spread over 900 acres in Andhra Pradesh, (b) electro -optical device manufacturing facility (INR2.5b) in Andhra Pradesh, and (c) electronic warfare test range. BHE is also upgrading its image intensifier technology -based tubes fabrication facility (INR2b).

Outlook

We maintain Buy with a revised TP of INR215 (25x June FY19E EPS, its peak historical valuation to factor in improved pace of decision -making in defense sector).

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