Bharat Electronics rallies 5% post Q1 results, strong order book position

With the healthy order book at Rs 55,333 crore, strong pipeline of orders and better margin profile, BEL is well placed to grow its earnings in double digits in the next couple of years, analyst say.

Shares of Bharat Electronics (BEL) jumped 5 per cent to Rs 258.20 on the BSE in Monday’s intra-day trade after the company reported profit after tax (PAT) of Rs 431.49 crore in the June quarter (Q1FY23), due to higher revenue and on the back of lower base. The state-owned aerospace & defense company had posted PAT of Rs 11.15 crore in Q1FY22. As of July 1, 2022, the company’s order book position stood at Rs 55,333 crore.

The stock traded close to its 52-week high of Rs 259.50 touched on April 19, 2022. At 09:30 am, the stock quoted nearly 5 per cent higher as compared to 0.7 per cent rise in the S&P BSE Sensex. The trading volumes on the counter jumped nearly 10-fold with a combined 10.9 million equity shares changing hands on the NSE and BSE.

BEL said the company has achieved a turnover of Rs 3,064 crore, during Q1FY23 as against a turnover of Rs 1,564 crore, up 96 per cent year on year. Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin improved by 1265 bps to 16.5 per cent in Q1FY23. Q1FY22 margin impacted due to high fixed costs as percentage of sales.

Q1FY23 performance was better than our expectations likely due to better than expected execution and higher than expected revenue spillover from Q4FY22. EBITDA margin was slightly better than our estimate. However, EBITDA and PAT were also better than expectations on the back of higher-than-expected revenues, ICICI Securities said in a note.

Going forward, the brokerage firm believes that, with the healthy order book at Rs 55,333 crore (~3.3x TTM revenues), strong pipeline of orders (in both defence & non-defence areas) and better margin profile, BEL is well placed to grow its earnings in double digits in the next couple of years.

Overall, expected double digit revenue, order inflow growth, sustained margins and strong order book to ensure better performance. Strategy to diversify into non-defence areas, focus on increasing exports and services share would aid long term growth and help de-risk its business, analysts said.