Bharat Electronics Q1 Results Review - Strong Performance On All Fronts : Yes Securities

Yes Securities Report

Bharat Electronics Ltd. reported a robust set of numbers with healthy operating performance. Revenue came in above our estimates at Rs 35.1 billion (up 13% YoY).

Operating leverage benefits led to a ~240 basis points YoY expansion in Ebitda margins. Capex guidance was maintained at ~Rs 6-7 billion which is higher than last three years’ run rate of ~Rs 4.5-5.5 billion.

A significant chunk of this capex will go towards fuses, electro optics, EW systems, explosives, etc. The major order of quick reaction surface-to-air missile is expected to be bagged by FY25 and execution will be spread over three-four years.

Order inflows came in at Rs 81.8 billion taking its order book to ~Rs 653.6 billion (3.7 times trailing twelve month revenue), providing revenue visibility for next few years.

Management maintained FY24 order inflow guidance at ~Rs 200 billion and revenue growth guidance of 15-17%.

Given strong tender pipeline, comfortable order book, healthy execution capabilities and diversification into newer business verticals we expect Bharat Electronics to report 17%/19% revenue/profit after tax compound annual growth rate over FY23-25E.

At current market price, the stock trades at 27.2 times/ 22.3 times FY24E/25E.

Owing to the recent run-up in the stock price, we downgrade it to 'Neutral' (previously 'Add') with a revised target price of Rs 134 valuing it at 23 times FY25E earnings per share.

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