Bharat Electronics up 9%, m-cap crosses Rs 2 trillion on healthy Q4 results

BEL stock surges: Shares of Bharat Electronics Limited (BEL) hit a new high of Rs 282, as they rallied 9 per cent on the BSE in Tuesday’s intra-day trade.

The surge came on the back of strong Q4 results. BEL's profit after tax (PAT) jumped 30.6 per cent year-on-year (YoY) to Rs 1,783 crore for March quarter (Q4FY24).

The stock of state-owned defence company is quoting higher for the sixth straight trading days and zoomed 26 per cent during the period. A sharp run-up in stock price has seen the market capitalisation of BEL crossing Rs 2 trillion today for thefirst time.

At 09:24 AM, with Rs 2.06 trillion market capitalisation, BEL was trading 8.9 per cent higher at Rs 281.85. In comparison, the S&P BSE Sensex was down 0.1 per cent at 73,929.

 

In Q4FY24, BEL’s revenue increased 32.6 per cent Y-o-Y and 106 per cent quarter-on-quarter (Q-o-Q) to Rs 8,564 crore. Ebitda margin however down 156 bps Y-o-Y and up 94 bps Q-o-Q at 26.7 per cent. Execution has improved sharply in Q4FY24 with approximately 33 per cent Y-o-Y revenue growth as compared to 5 per cent Y-o-Y in 9MFY24.

BEL is a leading aerospace and defence electronics company. It primarily manufactures advanced electronics products. Multi-product, multi-technology - diverse product range including radar, missile systems, electronic warfare & avionics, anti-submarine warfare, electro-optics, homeland security, civilian products, etc.

Overall, operational performance for FY24 beat expectations on account of better-than-expected Ebitda margin, which stood at 24.9 per cent (versus guidance of approximately 23 per cent). Meanwhile, revenue growth of approximately 4 per cent Y-o-Y in FY24 was largely in-line (as company already reported provisional revenue for FY24).

Order inflows have been strong at Rs 35,512 crore in FY24 (versus annual inflows of Rs 19,000-20,000 crore in FY22 & FY23). Order backlog at Rs 75,934 crore (3.7x FY24 revenue), provides healthy revenue growth visibility. Order pipeline remains strong in defence segments (electronic warfare, radars, communication, navigation systems etc for various platforms), non-defence segments and exports.

BEL is favourably positioned to capture the larger pie of huge opportunity in Indian defence & space electronics systems/sub-systems or components industry which is expected to clock 13-14 per cent compound annual growth rate (CAGR) over FY22-27 with the share of defence electronics (in total defence production) increasing to 40-42 per cent by FY27 (versus current share of 36-37 per cent), according to ICICI Securities.

BEL is expected to be the key beneficiary in this impending opportunity in indigenisation of defence platforms considering its strong technical expertise and capabilities in designing, developing and manufacturing a wide range of strategic electronic products/system, the brokerage firm said.

Healthy order-backlog with robust pipeline provides strong earnings visibility. Moreover, company’s strategy to diversify into non-defence, focus on increasing exports & services share would aid long term growth and help de-risk its business, it added.

On the other hand, Motilal Oswal Financial Services (MOFSL) expects BEL to be a key beneficiary of increasing defense indigenization. The share of indigenization in the Indian defense sector has been continuously moving up and the brokerage firm expects BEL’s revenue market share to remain high at around 12-13 per cent.

The company is continuously taking initiatives to increase the share of exports and non-defense revenues. The brokerage firm increase the valuation multiple to account for a larger market share of BEL, benefits of technology tie-ups, memorandum of understandings (MoUs), and an improving share of exports and non-defense in total revenues.