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Bharat Electronics Ltd Research Report - 11th Aug 2016

Capital Goods | Published on Aug 11th 2016


Bharat Electronics Ltd (BEL) reported bad set of numbers for 1QFY2017. Its top-line declined by 20.9% yoy to Rs847cr, which is below our estimate. For the quarter, BEL reported below than expected negative EBITDA of Rs71cr. Negative operating leverage in our view led to EBITDA de-growth. In-line with EBITDA degrowth, PAT de-grew 52.9% yoy to Rs36cr. PAT margins were down 290bps yoy to 4.3%, which is below our expectation. For 1QFY2017, BEL reported order inflows of Rs1,003cr, which includes Homeland Security, Navigational Complex System, and Next generation Main Automatic Exchange order wins. Post these wins, order book as of 1QFY2017- end stood at Rs32,139cr. Order book/ last twelve month (LTM) sales ratio as of 1QFY2017-end stood at 4.5x. Valuation: Despite disappointing quarterly results, we maintain our positive view towards the stock. Considering the delays in clearance from customer side, there exists possibility of better 2Q revenue booking. On the back of continuous order wins and strong order book, there exists some scope for the company delivering favorable performance going forward. On the back of strong market positioning, large order book, debt free status, we expect BEL to report increased traction in sales and earnings growth, going forward. We recommend BUY on the stock with price target of Rs1,414.

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CMP 1,232
Target Price 1,414
Investment Period12 Months

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Shareholding Pattern (%)

Public & Others3.0
Grand Total100.0

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