Overview of Bharat Electronics Shares
Bharat Electronics shares have attracted the attention of market analysts, who are optimistic about the company’s performance in the near future. With expectations of improved earnings and a robust order pipeline, analysts foresee a positive trajectory for the stock. As of last Friday, Bharat Electronics shares experienced a notable increase of 1.74%, closing at Rs 277.50 on the Bombay Stock Exchange (BSE). This surge has elevated the company’s market capitalization to Rs 2.02 lakh crore. It’s important to note that the stock reached a peak of Rs 340.35 on July 10, 2024, indicating an 18% decline from its 52-week high.
A More Attractive Valuation
Experts are highlighting that Bharat Electronics’ valuation has become more appealing after recent corrections. Jitendra Kumar Gupta, Senior Research Analyst at Moneycontrol.com, states that the stock now carries an overweight rating. This sentiment is supported by the company’s defensive business model, strong earnings visibility, and an impressive order backlog. Currently trading at 36 times the estimated earnings for FY26, this valuation reflects a sustainable potential for both stability and growth. Furthermore, the company’s dividend yield of 1.5% adds to its attractiveness compared to its private defense counterparts, which are marked by higher valuations.
Strengthening Execution and Orders
Bharat Electronics has demonstrated improved execution capabilities, marked by a significant revenue growth of 20.1% in Q1FY25. The easing of global supply-chain disruptions has notably contributed to this success. In this quarter, the flagship Long-Range Surface-to-Air Missile (LRSM) order yielded an impressive revenue of Rs 842 crore. Additionally, EBITDA grew by 41%, thanks to effective execution, reduced cost pressures, and significant revenue recognition. The EBITDA margin improved to 22.8%, up from 18.4% during the corresponding quarter last year.
Robust Order Book and Future Outlook
In the first quarter of FY25, Bharat Electronics reported strong inflows, raising its order book to approximately Rs 76,000 crore. This substantial order backlog ensures solid revenue visibility for the upcoming three years. Notably, in FY24, the company secured orders worth Rs 35,000 crore, surpassing its initial guidance of Rs 20,000 crore, indicating effective market penetration and demand for its products.
Capacity Expansion Initiatives
The company is poised for growth with plans to invest around Rs 25,000 crore this fiscal year, excluding potential orders for the Quick Reaction Surface-to-Air Missile (QRSM). As Bharat Electronics expands its production capabilities, the benefits of these investments are expected to materialize within the next 1-2 years. For FY25, the company has allocated Rs 800 crore specifically for capacity expansion, with four new facilities under construction. One facility is scheduled to become operational this year, while the remaining three are set to launch in the next fiscal year.
Earnings Forecast and Financial Health
Looking ahead, Bharat Electronics is targeting a robust 15% revenue growth for the current financial year, largely attributable to a strategic emphasis on enhancing existing orders and expanding into international markets. The company is leveraging its expertise to drive exports and maximize its growth potential.
Moreover, the earnings outlook remains promising, with EBITDA margins projected to be in the range of 23-25% for FY25. This optimistic forecast is bolstered by a favorable revenue mix and ongoing initiatives to control costs, indicating that Bharat Electronics is not only well-positioned in the market but also strategically aligned for future growth.
Conclusion
In summary, Bharat Electronics stands out for its defensive business model, strong earnings visibility, and a healthy order pipeline. The recent correction in its stock price has improved its valuation, making it a compelling option for investors looking for stability and growth in the defense sector.
