The shares of India’s leading player in the defence electronics sector gained traction this week after Morgan Stanley assigned an overweight call on the stock for an upside of 15%.
Share price movement
At 11:35 a.m., On Wednesday, Bharat Electronics Ltd shares were trading at ₹ 317, down 0.20 percent from the previous close on the National Stock Exchange. The company has a market capitalization of ₹ 2,32,049 crores.
Reason for the rise
Bharat Electronics Ltd(BEL). manufactures and supplies electronic equipment and systems to the defence sector. The company has expertise in designing, developing, manufacturing, and supplying a wide range of strategic electronic products/systems.
The company’s product portfolio includes defence communication products, naval systems, land-based radars, avionics, electro-optics, tanks, etc.
The company’s shares have delivered a return of around 70 percent in six months and 142 percent in a year.
Company plans
The company management expects ₹ 50,000 crores worth of orders in the next 2 years. As well as planned a Capex outlay of ₹700 crores to ₹800 crores capital expenditure plan for the next 2 years.
BEL management aims for 15% revenue growth in FY25, targeting an EBITDA margin of 23-25%. The company expects large orders worth Rs 15,000 crore soon and projects order acquisitions of Rs 25,000 crore for FY25. Additionally, BEL anticipates an export order exceeding $200 million.
Over the next two years, BEL forecasts work orders totaling Rs 50,000 crore and has planned a capital expenditure outlay between Rs 700 crore and Rs 800 crore.
Target
A global research and broking firm, Morgan Stanley has given an overweight call on Bharat Electronics for a target price of Rs 364 per share with an upside of 15 percent based on Wednesday’s trading price.
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Reason for target
BEL’s Q1FY25 performance surpassed expectations, with notable increases in revenue, EBITDA, and adjusted PAT. The company reported a 47% year-on-year growth in net profit and a 20% rise in revenue for the quarter. Brokerage reported.
Morgan Stanley analysts observed that BEL has upheld its FY25 guidance and is expected to secure a significant order for the QRSAM (Quick Reaction Surface-to-Air Missile) system.
Meanwhile, Prabhudas Lilladher remains optimistic about BEL’s long-term growth potential, citing a strong order backlog and pipeline, driven by the government’s push for defence indigenization.
The company’s diversification into non-defence sectors, along with its robust balance sheet, cash flow generation, and return ratios, supports this positive outlook. As a result, Prabhudas Lilladher has upgraded the stock to ‘Accumulate’ with a target price of Rs 341 per share.”
The company’s revenue has gained by 14 percent year on year, rising from ₹17,734 crores in FY22-23 to ₹20,268 crores in FY23-24 During the same period, net profit has increased by 33 percent, from ₹2,986 crores to ₹3,985 crores.
Written by Omkar Chitnis
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