ICICI Direct recommended hold rating on Bharat Electronics with a target price of Rs 105 in its research report dated July 28, 2020.
ICICI Direct's research report on Bharat Electronics
Bharat Electronics (BEL) reported revenues at Rs 1671 crore, a decline of 20.5% YoY, below our estimate of Rs 1740 crore on the back of supply chain disruption affecting execution. Absolute EBITDA for the quarter came in at Rs 146.7 crore (vs. our estimate of Rs 208.6 crore), down 57.9% YoY. While EBITDA margins declined ~780 bps YoY to 8.8% (below our estimate of 12%) owing to higher-than-expected other expenses & employee expenses. Consequently, PAT fell 73.6% YoY to Rs 54.1 crore, impacted by slower execution, higher other expenses and lower other income, which declined 27.7% to Rs 18.4 crore YoY.
We expect BEL to report revenue, EBITDA, PAT CAGR of 7.3%, 3.4%, 2.0%, respectively, in FY20-22E. We value BEL at 13.5x on FY22E EPS to arrive at a revised target price of Rs 105 and maintain our HOLD rating. Any disappointment on execution front may significantly impact the operating performance of BEL.
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