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Bharat Electronics Ltd (BEL) reported a mixed set of numbers for 4QFY2016. Its top-line rose by 10.7% yoy to Rs3,135cr, which is below our estimate. The surprise came on the EBITDA margin front which came in ahead of our expectation at an impressive 29.3%, mainly led by savings on stock purchases. However, despite the expansion in EBITDA margin, PAT margins declined owing to lower other income and higher effective tax rate. For FY2016, the company reported order inflows of Rs17,094cr, which included an IACCS (Integrated Air Command Control Systems) order win of Rs8,000cr. Some of the other order wins include Weapon Locating Radar order, USHUS-II order, Sub-systems for T-90 and Shakti EW Systems order. Post the recent order wins, order book as of FY2016-end stood at Rs32,022cr. Order book/ last twelve month (LTM) sales ratio as of FY2016-end stood at 4.5x. Valuation: During the quarter, despite some disappointment on the revenue front, BEL surprised us on the margins front. In terms of FY2016 performance, BEL won orders to the tune of Rs17,094cr. This can be perceived as a good sign and some indication of the company delivering a favorable performance going forward. Further, we expect the company to continue reporting order wins on the back of its strong market positioning. On the back of increase in order inflows, we are optimistic that the company should see increased traction in sales and earnings growth, going forward. Since our initiation report, BEL’s stock attained our then recommended target price of Rs1,414 although it then corrected. We see the correction as an opportunity to enter the stock with the valuation having turned attractive. So we recommend a BUY on the stock with a price target of Rs1,414.Download Full Report
|Investment Period||12 Months|
|MCAP BSE (Rs in Cr)||31,697.41|
|MCAP NSE (Rs in Cr)||31,696.30|
|Div Yield (%)||1.29|
Shareholding Pattern (%)
|Public & Others||3.0|