BEL Q3: Brokerages set price targets of up to Rs 370 for Bharat Electronics, citing the Navratna defence company’s strong execution, large order book, and significant margin beat.
Bharat Electronics, a Navratna military business, published excellent Q3 figures, along with an equally bullish management commentary, which received high praise from brokerages. Analysts are optimistic about the company’s future growth, citing its big order book and good margins.
Bharat Electronics reported a 37% increase in revenue year on year to Rs 5,643.25 crore in the December quarter, while net profit increased by 47% to Rs 1,316.06 crore. However, the highlight of the show was BEL’s tremendous 330 basis point year-on-year increase in EBITDA margin to 28.7 percent in Q3, which exceeded the company’s own guidance of 23-25 percent for the previous six-eight quarters. The margin was also significantly greater than the Street’s estimate of 23.7 percent.
According to Jefferies, BEL’s margin strength increases confidence in its long-term profitability. Jefferies reiterated its ‘buy’ rating on BEL, with a target price of Rs 370.
Nomura, a brokerage firm, upped its FY25 EBITDA margin and earnings-per-share projections for the stock by 200 basis points and 8%, respectively, to compensate for the big operational beat in Q3. Nomura has a ‘buy’ call on BEL, with a target price of Rs 363.
Similarly, Nuvama Institutional Equities upped BEL’s FY25-27 EPS predictions by 2-11 percent, while raising its price target to Rs 350. Nuvama also has a ‘buy’ recommendation on BEL.
Meanwhile, management expressed optimism about future development, predicting order inflows of Rs 25,000 crore by the end of FY25, up from the current Rs 11,000 crore, thanks to a robust project pipeline and outstanding execution. “Many projects are in the pipeline, and we are hopeful of securing several within the next two months,” said Manoj Jain, CMD of BEL.
Despite this, the company maintained its revenue and margin target for FY25, indicating a prudent approach. Regardless, Nomura expects BEL to see high demand in Q4.
Nuvama further believes that the company’s solid order book of Rs 71,100 crore and pipeline of more than Rs 1 lakh crore give stability for future growth. The firm has chosen Bharat Electronics as its top sectoral option, citing its large order book (3.5x FY24 sales) and persistent execution outperformance, which is aided by increased localisation and enhanced cost savings, resulting in continued earnings growth.
“We believe BHE has more positive catalysts/triggers than negative ones, and has further scope for a re-rating given it has been consistently beating its own guidance on profitability,” Nuvama wrote in an e-mail.
On Thursday, Bharat Electronics’ shares closed more than 4% higher on the NSE at Rs 278.75.
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