A company is said to be ‘fundamentally strong’ when it portrays a specific set of characteristics, i.e., strong and consistent financial performance, lower leverage ratios, and many more.
Listed below is one such fundamentally strong stock associated with the ‘defence’ sector that has received a ‘Buy’ call for a potential upside of more than 25 percent:
Bharat Electronics Limited
With a market capitalization of Rs 1.36 lakh crores, the stocks of Bharat Electronics Limited opened their trading hour on Tuesday at Rs 190.40 and closed the session at Rs 185.40, slipping approximately 2.40 percent compared to the previous closing levels of Rs 189.85 apiece.
Keeping a purview of the last one year, the company’s stock has delivered closer to multibagger returns of approximately 99 percent to its stakeholders.
Having a glance at the latest financial reports, the company’s prime indicators of business, viz, its operating revenues as well as after-tax profits, exhibited a jump in numbers with the former increasing from Rs 4,009 crores during Q2FY24 to Rs 4,162 crores during Q3FY24 and the latter, keeping the timeframe the same, rose from Rs 790 crores to Rs 860 crores.
In addition, the company also reported health margin and return ratios during the recent period with the net profit margin reported at 16.57 percent in FY23, a jump from 15.32 percent of margin previous year. The company, during the same period, reported a return on equity (RoE) of 21.53 percent and a return on capital employed (RoCE) of 26.38 percent.
Having a positive outlook, ICICI Direct gave a ‘Buy’ recommendation on the company’s stock with a target price of Rs 240 indicating a potential upside of 30 percent.
The rationale behind providing such a recommendation pertains to the increasing necessity of modernised indigenous defence platforms, healthy order-book position, and robust order pipeline among others.
As per the recent presentations, the company’s order book stands at Rs 26,761 crores against the guidance of Rs 20,000 crores as of the quarter ended December 2023. Moreover, it expects to have an inflow of orders worth Rs 50,000 crores in the coming two years.
Furthermore, the company also provided guidance on its capital expenditure (Capex) which, for FY24, stands at around Rs 700 crores. For the coming couple of financial years, the company plans a capex of Rs 800 crores.
Incorporated in 1954, Bharat Electronics Limited (BEL) is an aerospace and defense company manufacturing a wide range of specialized electronics for civilian and defence use. Its defense products include land-based radars, naval systems, electronic warfare systems, avionics, weapon systems, microwave super components, and many more.
Written by Amit Madnani
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