Motilal Oswal's research report on Bharat Electronics
Despite the reduced majority, we expect that the upcoming government’s policy focus on investment-led growth, capex, infrastructure, manufacturing, and defense will continue. Particularly for the defense sector, the government initiated several initiatives in last 3-4 years, such as indigenization, higher private sector participation, and increasing defense exports, and we expect a similar focus to continue going forward too. Accordingly, we continue to like Bharat Electronics (BHE) in the defense space, given its presence across highly specialized defense electronics segment. The company’s order inflows for FY24 were far ahead of its guidance, thereby hedging it against any slowdown in order inflows in FY25. With a strong order book, stable gross margin and efficient control over working capital, we expect BHE to continue to benefit from defense spending.
Outlook
We thus maintain our estimates and BUY rating on BHE with an unchanged TP of INR310, based on 35x two-year forward earnings.
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