BEL reported a strong financial performance during the quarter, registering growth on all fronts. The company did miss its revenue estimates but highlighted its strong operational capabilities.
Shares of Bharat Electronics (BEL) are in focus on October 29 after the defence and aerospace company’s fiscal second-quarter earnings beat Street estimates, driven by better-than-expected margin performance.
Morgan Stanley has given an overweight call on ‘BEL’, setting a target price of Rs 364 per share. The company is projecting revenue growth of 15 percent for F25, with order inflow anticipated at Rs 25,000 crore and a gross margin of 42 percent.
The near-term outlook is positive, with confidence in maintaining a 15 percent revenue compound annual growth rate (CAGR) over the next five years. Additionally, there are plans to increase the revenue CAGR to 17.5 percent, supported by strong prospects for order inflows.
BEL posted a standalone net profit of Rs 1,091.27 crore in Q2FY25, a 34 percent on-year. Revenue from operations rose 14.8 percent YoY to Rs 4,583.41 crore, led by a strong order book. The company reported an EBITDA of Rs 1,399 crore with a margin of 30.4 percent.
Follow our market blog to catch all the live action
BEL’s order inflows stood at Rs 7,400 crore during 1HFY25. Analysts at Motilal Oswal expect defense ordering to start ramping up in the coming quarters. “We expect BEL to remain a key beneficiary of the same, with key focus areas being from naval, EW systems, artillery systems, platform orders, Kavach, exports, et al,” they said.
The brokerage maintained its estimates and expects sales, EBITDA, and PAT CAGRs of 19 percent, 19 percent, and 22 percent, respectively, over FY24-27.
“We expect operating cash flow (OCF)/Free cash flow (FCF) to remain strong over FY25-27, led by control over working capital,” it said. BEL had a cash surplus of Rs 11,000 crore (as of FY24), providing scope for further capacity expansion, analysts noted.
Story continues below Advertisement
BEL stock is currently trading at 33.1x/27.4x on FY26E/FY27E EPS. “We maintain our estimates and continue to value the company at 35x two-year forward earnings,” said Motilal Oswal as it reiterated a ‘buy’ rating on the stock with a target price of Rs 360.
A slowdown in order inflows from the defense and non-defense segments, increased competition, further delays in finalization of large tenders, a sharp rise in commodity prices, and delays in payments from MoD can adversely impact estimates on revenues, margins, and cash flows, it added.
Also Read | Small-caps run the risk of extended selloff as earnings slow
BEL shares closed nearly a percent lower at Rs 269.85 on the National Stock Exchange (NSE) in the previous session. The stock has risen around 46 percent so far this year, outperforming Nifty’s returns of 12 percent.
In the past 12 months, the counter has gained 104 percent, more than doubling investors’ capital. In comparison, Nifty rose 28 percent during this period.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.