Buy Bharat Electronics; target of Rs 2600: Motilal Oswal

Brokerage house Motilal Oswal is bullish on Bharat Electronics and has recommended buy rating on the stock with a target price of Rs 2600, in its research report dated November 08, 2014.

November 26, 2014 / 14:40 IST

26 Aug, 2025 12:21

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Motilal Oswal's report on Bharat Electronics

2QFY15 operating performance meaningfully above estimates, with revenues at INR12.9b (up 24% YoY) vs estimates of INR11.6b and EBITDA at INR1.2b (up 6815% YoY) vs estimates of INR473m. EBIDTA margins at 9.2%, was up 900bps YoY as strong execution led to better operating leverage.

2QFY15 revenues were supported by execution of Akash Missiles, Tactical Control Radars, Passive Night Vision Devices, etc. During FY11/12, BHE received orders for ~INR65b for the Akash missiles, and the execution had been delayed, which witnessed a pick-up in 2QFY15. Even export revenues have seen good traction at USD15.8m (up168% YoY). NWC has also deteriorated from 72 days in 2QFY14 to 97days in 2QFY15, given that the advances on Akash projects are being utilized towards project execution.

BHE’s current order book stands at INR228.8b as at end 2QFY15, BTB at 3.5x. Order inflow declined 19% YoY to INR8.3b, and key orders received include: Hull Mounted Sonar, Ship Data Network, Modular Combat Management System, etc.

"BHE is well positioned to benefit from the rising defense expenditure supported by a) strong manufacturing base (Capacity utilization of ~60%) and execution track record, b) relationship with defense and government agencies, c) strategic collaboration with foreign technology partners for new products development d) in-house R&D capabilities (R&D spend at 7.6% of revenues) and e) Increased focus on exports to friendly countries. We maintain Buy, with Price Target of INR2,600/share (18x FY16E)", says Motilal Oswal research report.