BEL Systems were there in all the forward areas, providing offensive and defensive applications during the current domestic offensive operations. A lot of the solutions developed by BEL were used by the forces in the field this time.
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Bharat Electronics Ltd. has witnessed its best-ever performance, revenue, Ebitda, PAT and margins. With BEL expecting order inflow of ~Rs 570 billion over the next 12–13 months, we remain optimistic on its OI opportunity.
Apart from defence, the company is also expanding its product offerings across the non-defence platforms and that is likely to contribute positively.
Further, management guides for a 15–17.5% revenue CAGR and a >20% PAT CAGR over the next three–four years. This apart, BEL is investing significantly in its R&D capabilities, as it plans to add 700-1,000 engineers in its R&D team.
We continue to believe that BEL's order book execution shall remain steady with robust margins over the next two–three years. Taking cognizance of its FY25 performance, we raise our FY26E/FY27E EPS by 6%/7%.
Further, we raise the multiple to 45x (earlier 40x) owing to better visibility on order funnel (including emergency procurement) in light of the current geopolitical situation.
Our revised target price works out to Rs 420 (earlier Rs 350) based on 45x FY27E EPS. Maintain Buy. Working capital rose in FY25, mainly due to order spill-over to FY26.
Key risks
Delay in awarding of orders.
Margin compression due to higher proportion of bought-out components.
Slower execution due to downstream partners unable to ramp-up adequately.
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