Bharat Electronics Q3 results mixed bag to pay dividend. should you buy

State-owned aerospace and defense electronics company Bharat Electronics (BEL) missed estimates in terms of profitability during the third quarter of FY23. Additionally, higher raw material costs impacted the EBITDA margin. On the positive front, revenue remained as expected. In addition, the company has declared an interim dividend of 60%.

In Q3FY23, BEL gains 598.77 crore on standalone basis However, there was a decrease of Rs 583.37 crore in the same period a year ago 611.05 crore in the September 2022 quarter. Meanwhile, revenue from operations came in above 4,064.90 crores 3,660.84 crore in Q3FY22 and 3,907.35 crore in Q2FY23.

The company’s board on Saturday recommended an interim dividend of Rs. 0.60 per share (at face value 1 each) on the increased share capital of the company after the bonus issue of equity shares in September 2022. The said dividend will be payable to all eligible shareholders holding shares as on the record date i.e. 10 February 2023.

Last week, BEL shares fell 4.94% ahead of earnings on Friday. 94.30 per share on BSE.

According to ICICI Direct, Bharat Electronics’ revenue came in line with estimates, while higher-than-expected raw material costs impacted margins.

The brokerage said, “Revenue grew by 11.8% YoY (up 4.7% QoQ) 4,131.0 crores; To a large extent as expected. The growth was primarily driven by improved execution.” It added that the order backlog was on 50,116 crore (2.9x TTM revenue) by the end of December 2022. implicit orders were on flow 1,452 crore during Q3FY23 and 3,736 during 9MFY23.

Moreover, as per the brokerage, EBITDA margin contracted by 160 bps YoY (-103 bps QoQ) to 20.7%; Lower than their estimate of 22.2% — mainly due to higher than expected raw material costs. In terms of profitability, PAT increased by 2.6% 598.8 crore against their estimate 653.1 cr — mainly due to lower than expected OPM.

What should investors do?

“Overall, expected double-digit revenue, order inflow growth, sustained margins and strong order book to ensure outperformance,” ICICI Direct’s note said. Adding, the note said, “We remain long-term positive and maintain our BUY rating on the stock.” The brokerage has set a target price of 130 on Bharat Electronics.

The key triggers for future performance as per the brokerage are:

Strategy to diversify into non-defence sectors, focus on increasing share of exports and services will aid long-term growth and de-risk its business

– Strong order pipeline in FY23-24E

– ICICI Direct expects revenue, and EBITDA to grow at a CAGR of 18.5% and 20.1% respectively, aided by sustained margins at ~22% in FY22-FY24E.

Strong balance sheet, double digit return ratio

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