Bharat Electronics up 9%, m-cap exceeds Rs 2 trillion on strong Q4 earnings.
Bharat Electronics Limited (BEL) shares rose 9% on the BSE in Tuesday’s intraday session, reaching a record high of Rs 282.
The spike followed good fourth-quarter performance. BEL’s profit after tax (PAT) increased 30.6 percent year on year (YoY) to Rs 1,783 crore in the March quarter (Q4 FY24).
The shares of the state-owned defense business is trading higher for the sixth consecutive trading day, up 26%. BEL’s market capitalization crossed Rs 2 trillion for the first time today, thanks to a strong increase in stock prices.
At 09:24 AM, with a market value of Rs 2.06 trillion, BEL was trading 8.9 percent higher at Rs 281.85. In comparison with the S&P
BEL’s revenue climbed 32.6 percent year on year and 106 percent quarter on quarter (Q-o-Q) to Rs 8,564 crore in Q4 FY24. However, the Ebitda margin fell 156 basis points year on year and rose 94 basis points quarter on quarter to 26.7 percent. Execution increased significantly in Q4FY24, with around 33% year-on-year revenue growth compared to 5% year on year in 9MFY24.
BEL is a top aerospace and defense electronics business. It mostly produces sophisticated electronic devices. Radar, missile systems, electronic warfare and avionics, anti-submarine warfare, electro-optics, homeland security, civilian goods, and more are among the numerous product offerings.
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.
