LKP Research's research report on Bharat Electronics
Bharat Electronics (BEL), a government owned defence company, is a leader in supplying electronics based equipments to all the three faculties of defence – Army, Airforce and Navy. The company has a rich history of being a beneficiary in supplying equipments in collaboration with DRDO to the MoD. With a strong base of nearly 50% scientists & engineers and an established local vendor base, the company boasts of quality research in the defence space, with a huge capex going into R&D. BEL has a humongous order book of ₹518 bn to be delivered over the next 3-4 years, which itself provides a robust outlook and visibility over long term. We believe a cut in defence budget may impact the receivables in FY 21 in view of Covid-19, but BEL has demonstrated strong execution capability over the years and will be able to weather this storm. As announced yesterday, increase in FDI limit to 74% from 49% may offer a positive surprise.
Outlook
Our bullish stance on BEL despite an expected muted performance this fiscal is further corroborated by the stake increase by Domestic Fund Houses in the last quarter of FY20. In line with this, based on FY 22E, we initiate a coverage on BEL with a BUY rating and a target of ₹100 (12x times FY 22E earnings).
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First Published on May 17, 2020 09:33 pm
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