Analysts Retain 'Buy' On Bharat Electronics Citing Defence Indigenisation, Rising Exports

Most analysts retained their ‘buy' ratings on Bharat Electronics Ltd., suggesting that its rising share of exports as well as India's push to make defence equipment locally and reduce import burden brightens outlook for the navratna PSU.

The aerospace and defence electronics company, under the Ministry of Defence, has achieved a turnover of Rs 15,000 crore during FY22 against Rs 13,818 crore a year ago, according to its exchange filing on Friday. That's despite the disruptions caused by the Covid-19 pandemic and global semiconductors shortage.

The company has bagged orders worth Rs 18,000 crore in FY22. Its order book as on April 1 was around Rs 57,000 crore.

BEL's diversity of customer profile, consistent R&D spending as well as ramp-up of non-defence business, according to analysts, augur well for its long-term growth.

Over the past three sessions, shares of BEL have risen nearly 4%. On Tuesday, the stock rose nearly 2% before paring the gains to close 0.4% lower. Of the 29 analysts tracking the company, 25 maintain a ‘buy', three suggest a ‘hold' and one recommends a ‘sell', according to Bloomberg data. The 12-month consensus price target implies an upside of 15%.

Here's what analysts have to say about BEL.

Morgan Stanley

• Reiterates 'overweight/in line', raised target price to Rs 260 from Rs 202—an implied upside of 21%.

• BEL's diverse customer profile implies strong total addressable market from local manufacturing.

• Consistent R&D spending makes the company competitive, given the rapid advancements in technology.

• The company has reasonably strong earnings visibility and is focusing on diversification in non-defence segments.

• Rising proportion of exports augurs well for long-term growth.

• BEL is likely to be a key beneficiary of favourable policy environment for local manufacturing.

• BEL is the best way to play India's defence indigenisation story.

• Wide product range, strong manufacturing footprint, good execution record, diversified order book, high R&D spending, collaboration with global major and availability of skilled labour are some of the major positives for the company.

• The firm remains the top pick in the sector, thanks to growing defence capex and shift towards indigenisation.

• Medium-term growth prospects remain healthy, aided by rising share of exports and ramp-up of non-defence business.

• FY22 order inflow exceeded expectations, while sales came in line, despite the impact due to semiconductor shortage.

• Key orders won in FY22 include Avionics pack for LCA (light combat aircraft), advanced electronic warfare suite for fighter aircraft, instrumented electronic warfare range, electronic voting machine and VVPAT, among others.