Bharat Electronics Ltd (BEL), an Indian state-owned aerospace and defence company, has won orders worth ₹59 billion thus far in FY24. The standout among these orders is the acquisition of contracts for the 3rd and 4th regiments of the improved Akash Weapon System (AWS) upgrades from BDL (Bharat Dynamics Limited).
In addition to the AWS upgrades, the company received orders worth ₹19.8 billion for various projects, including the Shakti EW & Sanket MK III (Naval Systems), which is estimated to be valued at around ₹10 billion, said domestic brokerage firm ICICI Securities.
The company has also secured orders for GBMES & GBUV Com Jammer systems, MKBT systems, IFF-MK-XII crypto modules, and the upgradation of SDP & Display of Rohini radar, along with the training system for CMS P15B and CAMC for P28, among others, the brokerage added.
Going ahead, BEL is well-positioned to receive orders for naval platforms and fuses for the Indian Army in the long term, which could result in an order inflow of around ₹200 billion, as per ICICI Securities.
ICICI Securities expects BEL's robust execution of existing orders to sustain a steady revenue growth rate of 17% per annum through FY25. In the medium term, the brokerage also anticipates that orders for MRSAM (Medium Range Surface to Air Missile), QRSAM (Quick Reaction Surface to Air Missile), and ATGM (Anti-Tank Guided Missile) could contribute an additional ₹200 billion to the company's order book.
"In the long term, we believe orders from Tejas Mk1A and Mk2 as well as next-generation corvettes are likely to keep the order book robust. In our view, BEL is significantly immune to potential delays or lower spending as it has exposure to major upcoming orders. Hence, the bill-to-book ratio of 3.5x (at the end of FY23) is expected to improve further," said the brokerage.
Besides, improving indigenisation and fast developing ecosystem for its products imply margins are likely to improve and working capital cycle may remain in check, it said.
Considering the steady order inflow and lower risk to its FY25E EPS estimate, ICICI Securities revised its FY25E P/E (Price-to-Earnings) multiple to 27x and raised the target price to ₹150 apiece from ₹140 earlier, implying a 25% upside from the stock's current market price.
BEL is one of the strategic DPSUs that is set to receive ₹1,100 billion of order inflow over the next 5 years. The brokerage stated that BEL was its top pick in the defence space.
Keeping its bullish stance, the brokerage also outlined the key risks, such as slower-than-expected order book build-up and delay in execution, which the brokerage said could lead to lower revenue and margins.
Meanwhile, BEL shares have zoomed 39.10% in less than three months to register a new all-time high of ₹127.35 apiece in the previous trading session. From its May 2020 low of ₹19.25, the stock has skyrocketed 525.71% to trade at the current level of ₹120.45 apiece.
Maintaining its upward trajectory, the stock has demonstrated consistent growth for the fifth consecutive year. In CY23, the stock has delivered a return of 20.77% so far, following an impressive gain of 42.75% in the previous year. Additionally, it soared by a remarkable 75% the year before that. In CY20 and CY19, the stock recorded gains of 19.89% and 13.76%, respectively.
23 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.