Bharat Electronics : targeting a healthy growth
Call & Research Report by Anand Rathi research
Sector : Defence Equipments
CMP Rs. 214, Target Rs. 243 ( fast 13% upside potential)
Target Period : 2 Months
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.
BEL is focusing primarily on the various ‘Make in India’ programmes. It has
offered its various products and services to major Platform OEMs and their
Tier I suppliers. This has helped BEL in leveraging partnerships for
development, co-production and similar arrangements with various OEM’s to
get the manufacturing of the products at BEL and utilization of services of BEL
not only for Indian programs but also for global requirements.
The order book of the Company as on 31 December 2021 is at around ₹ 560
billion. The order book comprises major programmes like Long Range Surface-
to-Air Missile System (LRSAM), the Akash Missile Systems, Command &
Control System, Battle Field Surveillance Systems, Fire Control Systems,
Software Defined Radios, Coastal Surveillance Systems, Advance Composite
Communication System, Naval Systems, Electronic Warfare Suite etc.
BEL is targeting a healthy growth of 12-15% and management is confident of
maintaining margins around 20-22% for FY2022E despite higher commodity
prices as it has a strong indigenous portfolio of products, which has reduced
dependence on imports and other commodity prices. The Non-Defence
segment businesses like Homeland Security, Smart Cities, EVMs and other
diversification areas will also contribute to the growth of the Company.
The future of the company looks promising. The Defence Sector is being
opened up for private sector participation with the evolution of Defence
Procurement Procedure. In this changing business scenario, BEL is focusing on
enhancing interaction at various levels and building long term relationships
with customers, emerging Strategic Partners and other key stakeholders in the
Indian defence industry as a trusted and committed partner. We initiate
coverage on BEL with a BUY rating and a target price of ₹ 243.