Shares of Bharat Dynamics have more than doubled investors' wealth so far in 2022, and yet ICICI Direct Research believes the stock still has room to rise. The brokerage noted in its most recent report that the company has a sizable order book worth ₹12,000 crore, which is 3.5 times TTM revenues, and it says this creates strong revenue visibility.
In addition, ₹20,000 crore worth of orders are in the pipeline, and a huge opportunity in exports driven by rising interest from friendly countries and lower costs on high indigenization levels are the main key triggers for the stock to fly high, the brokerage added.
ICICI Direct has a 12-month target price of ₹1,200 on the stock, an upside potential of over 26.66% from the stock previous closing price.
Bharat Dynamics has overall delivered an astounding return in 2022 and currently holds the second spot in the BSE PSU index with returns of 123% over the past year. So far in 2022, it has risen from ₹391.55 on January 03, 2022, to its current level of ₹947.35, representing a multi-bagger return of 142 per cent at a time when the Sensex has generated a return of 5.78%.
Further, over the last three years, the stock has surged from around ₹333 to the current level of ₹947.35, logging a nearly 184.48 per cent rise in this period.
This defence PSU stock began rising in February after the company signed a contract worth ₹3,131.82 crore with the Indian army to manufacture and supply Konkurs-M Anti-Tank Guided Missiles.
As the government appears committed to lowering imports and increasing exports, defence stocks have seen a surge in buying after the companies' order books were filled by the ministry of defence.
An IBEF report showed that demand for defence equipment in India has been growing due to the ongoing territorial disputes with Pakistan and China over the ownership of the northern state of Kashmir and the north-eastern state of Arunachal Pradesh, respectively.
To modernise its armed forces and reduce dependency on external dependence for defence procurement, several initiatives have been taken by the government to encourage "Make in India" activities via policy support initiatives.
Rajnath Singh, India's defence minister, stated in October that the country recorded defence exports worth ₹8,000 crore in the first half of FY23 and that it aims to reach ₹35,000 crore by 2025..
For the September-ending quarter, Bharat Dynamics reported a year-on-year (YoY) increase in standalone profit after tax (PAT) of 75% to ₹75.8 crore, up from ₹43.3 crore in the same period last year. Total revenue increased by nearly 10.62% to ₹579.8 crore in Q2 FY23, compared to ₹524.1 crore in the same period last year.
Further, the company’s operating profit rose to ₹93.9 crore in Q2 FY23 as against ₹66.1 crore in the corresponding quarter of last year.
Similarly, the EBITDA margin increased by 34.54% year on year, rising from 17.55% in Q2 FY23 to 13.13 % in Q2 FY22, an increase of nearly 422 basis point increase.
Bharat Dynamics is a small-cap defence stock with a market capitalization of Rs. 17,363.1 crores. The company is one of the leading defence PSUs in India, engaged in manufacturing surface-to-air missiles (SAMs), Anti-Tank Guided Missiles (ATGMs), underwater weapons, launchers, countermeasures and test equipment.
An average of 06 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.