Bharat Electronics - Weakness persists in execution, contribution margin - Kotak

BEL's 3QFY13 results reflected continued weakness in (1) sales (flat yoy, 4.4% decline in 9M) and (2) contribution margin (35% in 3QFY13, 34.5% in 9MFY13 against 37% in FY2012 and 42% over FY2010-11). Lower-than-expected staff cost share in sales in 3QFY13 (also fell in 9M despite falling sales) led to EBITDA margin reverting to 9.6% after two quarters of EBITDA losses.

We await 4QFY13 results (~40% of sales) before reviewing margins (low-margin Government-nominated orders may have been completed in 3QFY13). Retain REDUCE.

Source : Equity Bulls

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