Bharat Electronics (BEL) is buoyed by increased growth opportunities from large domestic defense procurement programs and expansion of civilian applications, highlights domestic brokerage and research firm IIFL.
“Investments in R&D and increased localization across large platforms will support value-addition, cost competitiveness and gross-margin expansion. Lean cost structure along with improving operating profitability and NWC cycle will help improve RoE/RoCE to 24%/31% by FY25ii; While maintaining strong FCF and cash chest,” the note said.
IIFL believes that BEL is on track to deliver 21% EPS in FY22-24ii and its pricing within the sector is attractive. The brokerage house reiterates its buy rating on BEL shares with a target price of 12 months 363 each.
“Gradual increase in the share of localized content across large system orders, favorable sales mix and various cost optimization measures – will help GM recover to 43% in FY23ii (+200 bps YoY). Operating leverage and benign employee cost will help BEL deliver 23% EBITDA margin in FY13, further improving.”
Last month, PSU Bharat Electronics Declared a bonus issue of equity shares in the ratio of 2:1, which means that an investor will receive two bonus equity shares for every equity share held in the company. The Board of Directors of the company decided to issue bonus share by over-capitalizing the shareholders 487 crores. Bonus shares are fully paid-up additional shares issued by a company to its existing shareholders.
Shares of BEL are up over 72% in the one-year period, while the PSU defense stock is up nearly 55% in year-on-year or YTD terms, compared to a nearly one per cent decline in the benchmark BSE Sensex. Bharat Electronics Limited (BEL) is an aerospace and defense electronics company owned by the Government of India.
For the first quarter ended June 2022 (Q1FY23), the company’s standalone net profit increased to Rs. 431 crore as against 11 crore recorded in the same period last year. As on June 30, 2022, the order book position of the company is approx. 55,333 crores.
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