Bharat Electronics Limited - Technofunda | Globe Capital
17-Nov-2021
Bharat Electronics Limited – Technofunda

With favourable government policies towards boosting indigenization of products through the Atmanirbhar Bharat

Overview and Recommendation

Brief:

With favourable government policies towards boosting indigenization of products through the Atmanirbhar Bharat initiative seemed to support the outlook on growth. At the CMP of Rs 217, the stock is trading at P/E multiple of 24.8x with ttm EPS of Rs 8.49.

Profile:

Bharat Electronics Limited (BEL) is a Navratna PSU under the Ministry of Defence, Government of India, which provides advanced products and systems for military, government and civilian customers. Primarily established to meet the specialised electronic equipment requirements of the Indian Defence Services, BEL now has a significant presence in the civilian market as well. It is an Indian state-owned aerospace and defence company with about nine factories, and several regional offices in India.

Key Triggers:

  • Strong Order Book: As on today the Company has strong order book of Rs. 53,752 crore. In the first-quarter of 2020-21, the company secured orders worth Rs. 3,419 crore. The orders were for making ventilators, advance torpedo defence system and smart city projects. The company is expecting major orders for electronics warfare systems, avionics package for light combat aircraft (LCA), naval fire control system and radar systems. BEL’s export order stood at $164 million as on July 1. Its export turnover in the first quarter was $1.89 million. The order book provides almost four years of revenue visibility.

According to the management, order inflow run rates would be in the range of Rs. 15,000-17,000 crore in FY22. Its order pipeline includes orders for Akash missile system, long-range surface-to-air missile systems, naval equipment and radar systems. The Company is also into project execution for the development of smart cities and manufacturing of electronic voting machines. Its order pipeline includes orders for Akash missile system, long-range surface-to-air missile systems, naval equipment and radar systems. BEL is also into project execution for the development of smart cities and manufacturing of electronic voting machines.

  • Benefited from Atmanirbhar Bharat: Greater focus on domestic defence production should serve the company well The government’s push for making India’s defence sector ‘Atmanirbhar’ is aimed at boosting the country’s manufacturing capability & reducing its dependence on import.

 

Valuation & View:

With favourable government policies towards boosting indigenization of products through the Atmanirbhar Bharat initiative seemed to support the outlook on growth. At the CMP of Rs 217, the stock is trading at P/E multiple of 24.8x with ttm EPS of Rs 8.49.

Key Risk:

  • The emergence of multiple waves of the pandemic have prolonged the lockdowns in different parts in country may dent profitability.

Technical View:

BEL is a consistent performer among PSU stocks. It has been trading above its short term as well as long term moving averages in higher highs and higher lows formation on daily charts. At current juncture, stock has formed a fresh buying pivot on daily charts with noticeable rise in volumes.

Hence, we recommend to go long in this stock as we expect it to test 250 levels in immediate near term.

Summary:

Considering both the factors fundamental & technical parameter, we recommend a ‘BUY’ in BEL at current level for the target price of Rs. 250 with close below stop loss of Rs. 198.

Disclosure

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