Buy Bharat Electronics; target of Rs 120: Prabhudas Lilladher

120

Prabhudas Lilladher’s research report on Bharat Electronics

Bharat electronics Ltd’s (BEL) PAT for 4QFY19 was up 20% YoY at Rs6.7 bn. This was mainly led by 485bps YoY gross margin expansion due to change in product mix with higher share of ingeniously developed products. EBITDA margin in 4Q/FY19 improved 185/431bps YoY to 23.9%/23.7%. Order inflow during the quarter was up 144%YoY at Rs69 bn, resulting robust order back backlog of Rs518 bn (4.3x FY19 revenue) end of FY19. Major orders expected during FY20 are Akash Missile System (7 Sqdn) (Rs50 bn), Coastal Surveillance System (Rs15 bn) and Samyukta Upgrade (Rs5 bn). Revenue is expected to grow in the range of 13-15% which will include execution of LR-SAM project (deadline 4QFY20) which has relatively higher imported content. Hence, expected EBITDA margin to be in the range of 20-21%.

Outlook

The stock has rallied ~38% over the last three months and currently trading at 14.6x/13.6x FY20/21E. We recommend Accumulate on the stock with TP of Rs120.

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