1. Maintain buy on BEL after strong margins & execution

Maintain buy on BEL after strong margins & execution

We maintain ‘buy’ rating on Bharat Electronics (BEL) with a target price...

Published: November 11, 2014 12:15 AM

We maintain ‘buy’ rating on Bharat Electronics (BEL) with a target price of R2,354 per share. The stock is trading at 15.6x FY16e earnings. We believe the opportunity for BEL is large given the increased focus of the new government on modernisation of current fleet and procurement of new capital equipments. We continue to believe BEL offers good investment opportunities to the investors who want to invest in the Indian defence sector with a long-term view.

BEL reported sales of R1,290 crore, up 24% y-o-y. Pick-up in supply to major projects like Akash Missile System, Passive Night Vision Devices ,Electronic Support Measure System, Low Level Light Weight Radar, Tactical Control Radar, Stabilised Optronic Pedestal, L-band Radar, Missile Warning System etc helped support healthy sales growth. The company reported ebitda of R110 crore. Gross margins improved by 230 bps to 43.1%, while other expenses were down 5% y-o-y to R140 crore. Other income was up only 1% y-o-y to R110 crore. Adjusted PAT was up 147% y-o-y to R140 crore. Major planned projects for execution in FY15 are Akash Missile, Low level light weight radar, 3D- Tactical control radar, Passive night vision devices, Missile warning systems, upgradation of Schika.

Order book at the end of Q2FY15 stood at R22,800 crore, down 8% y-o-y. The order inflow for the quarter stood at R820 crore down 19% y-o-y.

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