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HomeMarketStocksBuy Bharat Electronics, target price Rs 131: LKP Securities

Buy Bharat Electronics, target price Rs 131: LKP Securities


has buy call on Bharat Electronics with a target price of Rs 131. The current market price of Bharat Electronics is Rs 107. Bharat Electronics Ltd., incorporated in the year 1954, is a Large Cap company (having a market cap of Rs 78104.99 Crore) operating in Defence sector.

Bharat Electronics Ltd. key Products/Revenue Segments include Electronic Components & Equipments, Sale of services, Other Operating Revenue, Scrap and Rent for the year ending 31-Mar-2022.

Financials

For the quarter ended 30-09-2022, the company reported a Consolidated Total Income of Rs 4035.38 Crore, up 25.21 % from last quarter Total Income of Rs 3222.82 Crore and up 7.89 % from last year same quarter Total Income of Rs 3740.43 Crore. Company reported net profit after tax of Rs 614.83 Crore in latest quarter.

Investment Rationale

reported decent Q2 FY23 numbers. It is leveraging its past R&D investments and change in defence ministry’s stance on import ban and increasing its levels of indigenization. Its impetus on outsourcing low-value-addition functions is further helping in improving and de-risking its cost structure. Further, the company plans to set up a semi-conductor fabrication plant in consortium with Limited () and other companies, which would further reduce dependency on imports in the long term. BEL is expected to utilize the above cost savings to increase its spending on R&D (6-7% of topline) and capex (₹7.5bn per annum over the next 3-4 years) and enter new markets. BEL has been able to negate the overhang of lower margin in nomination-based contracts by reducing quantum of imports and non-defence. It is also focusing on up-skilling its workforce and adding to employee count (100 per year taking up to 2600 employees currently with 40% engineers) in new areas with good growth prospects. Its strong order book, well-defined and distinct order pipeline gives us a very strong visibility over mid to long term. BEL’s new initiative in non-defence streams and emphasis on exports is expected to gain momentum soon and contribute meaningfully to the topline. On the back of strong topline and margin performance, huge cash surplus, comfortable WC cycle and rich return ratios, it maintains BUY rating on the stock with a TP of ₹131 (27x FY24E earnings).

Promoter/FII Holdings
Promoters held 51.14 per cent stake in the company as of 30-Sep-2022, while FIIs owned 15.99 per cent, DIIs 25.58 per cent.

(Disclaimer: Recommendations given in this section or any reports attached herein are authored by an external party. Views expressed are that of the respective authors/entities. These do not represent the views of Economic Times (ET). ET does not guarantee, vouch for, endorse any of its contents and hereby disclaims all warranties, express or implied, relating to the same. Please consult your financial adviser and seek independent advice.



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