Company Update - Bharat Electronics - ICICI Direct

Bharat Electronics (BEL) is expected to ramp up on the execution front in coming years given strong order book size and robust order inflow pipeline over the next couple of years. BEL's strategy to diversify its revenue stream to non-defence segments would de-risk its business given concentrated exposure to defence budgets likely to auger well in long term. BEL is expects to deliver double digit revenue growth over the next two years along with sustained margins at current levels of 20-21%. It expects services to contribute ~10% of revenue in FY21E and gradually to increase to ~25% of revenue over the next five years growing at a CAGR of 10-15%. Overall, diversification strategy, expected double digit growth, sustainable margins and better order inflows suggest a strong performance in the long term.

Valuation & Outlook

Overall, expected double digit revenue growth, sustainable margins, better order inflows and strong order book of Rs. 52148 crore suggests strong performance in long term. Also, strategy to diversify into non-defence areas, focus on increasing exports and services share would aid long term growth and help de-risk its business model. We introduce FY23E estimates and expect BEL to report revenue, EBITDA, PAT CAGR of 11.6%, 10.4%, 10.2%, respectively, in FY20-23E. We revise our target price from Rs. 110 to Rs. 170 (17x on FY23E EPS) and maintain BUY rating.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_BharatElectronics_CoUpdate_Jan21.pdf

Shares of BHARAT ELECTRONICS LTD. was last trading in BSE at Rs.131.7 as compared to the previous close of Rs. 133.1. The total number of shares traded during the day was 2507675 in over 6522 trades.

The stock hit an intraday high of Rs. 135 and intraday low of 131.35. The net turnover during the day was Rs. 334371618.

Source : Equity Bulls

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