The shares of India’s leading player in the defense electronics sector gained 3.75 percent to a 52-week high price of Rs 170.15 per share on Friday after UBS revised a target price on the stock with a 21 percent upside.
At 3:05 p.m., On Friday, Bharat Electronics Ltd shares were trading at Rs 168.85, up 2.96 percent from the previous close on the National Stock Exchange.
Bharat Electronics Ltd manufactures and supplies electronic equipment and systems to the defense sector. The company has expertise in designing, developing, manufacturing, and supplying a wide range of strategic electronic products/systems.
The company’s shares have delivered a return of around 35 percent in six months and 64 percent in a year.
The company’s revenue has climbed by 1.2 percent year on year, rising from Rs 3,961 crore in Q2FY23 to Rs 4,009 crore in Q2FY24. During the same period, net profit has increased by 27 percent from Rs 614 crore to Rs 780 crore.
UBS has revised the target on Bharat Electronics based on improvement in the company’s earnings growth visibility and expanding order pipeline, So analysts have given a target of Rs 205 per share with an upside of 21 percent based on Friday’s close price of Rs 169 per share.
The rationale behind providing such a recommendation is
● Based on an optimistic outlook on the company, the brokerage recognizes that the company has the potential to upgrade in new orders and exports over the next three to five years. Apart from BEL, the analysts also said that they preferred stocks like L&T and ABB in the segment.
● BEL’s order book was at Rs 6,900 crore at the end of the September quarter. According to the brokerage, the business has a long-term pipeline of more than Rs 2 trillion, which has been revised upward as new projects have been added.
● “A company is a prime beneficiary of an expanding defense manufacturing ecosystem, which, combined with BEL’s consistent and significant investments in R&D and capex, should bolster its competitive edge, allowing export potential as a tier-1 company,” according to the brokerage.
● UBS expects BEL to benefit the most from import reduction/export ramp-up among state-owned defense manufacturers but notes that recent management commentary has highlighted potential near-term revenue interruption, which might lead to revenue growth at the lower end of the topline estimate of 15% for FY24.
On December 15, Bharat Electronics Limited received an order of Rs 4,522 Crore from the Indian Army for the supply of Fuses of various calibers.
In addition, the company has also received additional orders worth Rs 356 Crores which pertain to other products like Electronic Warfare, Testers, Medical Systems, Consumables and Batteries for Electronic Voting Machines, Night Vision Devices Spares, and Services.
The BEL’s order backlog at the end of the first half of FY24 stood at Rs 68,700, up 30 percent year-on-year, which translates into 3.8 times the trailing 12 months’ revenue.
BEL’s net profit margins have improved from 15.32 percent in FY22 to 16.57 percent in FY23 while operating margin has increased from 20.63 percent to 22.20 percent.
Written by Omkar Chitnis
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