BEML zooms 18%, hits all-time high in weak market on healthy outlook

BEML is in a sweet spot to capitalise on 'Make-in-India' and the country's flourishing metro, railway & defence capex story, say analysts

BEML shares record high: Shares of BEML hit an all-time high of Rs 5,489.15, soaring 18 per cent on the BSE in Friday's intraday trade, in an otherwise weak market on a healthy business outlook.

The stock of the state-owned company surpassed its previous high of Rs 4,875.95, touched on June 18. BEML stock has bounced back 61 per cent from its previous month low of Rs 3,404 hit on June 4. The market price of BEML has zoomed 261 per cent from its 52-week low of Rs 1,520, touched on July 7, 2023.

At 10:31 AM, BEML stock was trading 16 per cent higher at Rs 5,409, as compared to 0.40 per cent decline in the BSE Sensex. The average trading volume on the counter more-than-doubled with a combined 4.07 million shares having changed hands on the NSE and BSE till the time of writing of this report.

 

BEML has three business verticals. In the financial year 2023-24 (FY24), Defence & Aerospace contributed 19 per cent of the total revenue, Rail Metro contributed 38 per cent, and Mining and Construction contributed 43 per cent. The company has a total order book position of Rs 11,872 crore as on March 31, 2024.

On May 17, 2024, BEML had bagged an order from Northern Coal Fields Limited for dump trucks worth Rs 250 crore.

With the Government of India's (GoI) impetus on promoting indigenous high-end mining equipment and increase in annual output to 1 billion tonnes by 2024 from 893 million tonnes currently, the demand for 'Made in India' heavy mining equipment is on the rise. The construction equipment market outlook is prospering, according to the company.

"The policy initiatives taken by the GoI with regard to boosting indigenous design, development, and manufacture of defence equipment in the country and making a sustainable defence industrial ecosystem has undoubtedly opened various opportunities for the domestic sector. The call for 'Atma Nirbhar Bharat' has provided further impetus to realise the goal of self-reliance," BEML said.

Under the Rail segment, BEML has received an order for supply of 10 rakes of Vande Bharat Sleeper trains from Integral Coach Factory (ICF).

BEML's client base consists of major Government organisations and PSUs including Coal India Limited, Ministry of Defence, and various metro rail corporations among others. BEML has various repeat orders, specifically in the rail and metro sector, owing to its track record in providing products and services to various metro rail corporations. BEML has been manufacturing products through technology transfer and have systematically indigenised products over the years.

"Since most of the company’s clients are PSUs, they place orders once the budget is approved, typically in August or September. Execution of these orders, under stipulated timelines, remains a key monitorable. Further, the Government’s push for indigenisation with the 'Make in India' campaign, is expected to augur well for BEML’s order book addition," rating agency CARE Ratings said in its rationale.

Those at Prabhudas Lilladher, meanwhile, believe BEML is in a sweet spot to capitalise on 'Make-in-India' and the country’s flourishing metro, railway and defence capex story led by defence order pipeline of Rs 40,000 crore, near-term order potential of over Rs 10,000 crore in metro projects, over Rs 36,500 crore opportunity in rolling stock for Vande Bharat trains, and healthy order book (Rs 12,400 crore) with Rs 800 crore capex planned to ramp up execution.

"With around 25 per cent of the company’s workforce expected to retire in the next two years, employee costs as a per cent of sales will likely drop by around 370bps by FY26. As a result, BEML is expected to witness considerable Ebitda margin expansion from 9.3 per cent in FY23 to 13.6 per cent in FY26," the brokerage firm said.