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Bharat Electronics Share Price Soars Over 9% to New Record High on Stellar Q4 Earnings

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By SK_INSIGHTMEDIA

Bharat Electronics

Bharat Electronics Limited (BEL) shares soar over 9% to a new high of ₹283 on stellar Q4 earnings, with a 30% rise in net profit and 32% revenue growth. Motilal Oswal upgrades BEL to ‘Buy’, projecting strong future performance amid defense sector opportunities.

Record-High Surge in BEL Share Price

BEL experienced a significant surge in its share price, climbing 9.35% to reach a new record high of ₹283 per share. This remarkable rise follows the release of the company’s Q4 and FY24 financial results on Monday, which far exceeded analyst expectations.

Outstanding Financial Performance in Q4 and FY24

BEL, a Navratna Defense Public Sector Undertaking (PSU), reported an impressive 30% increase in consolidated net profit for Q4, totaling ₹1,797 crore compared to ₹1,382 crore in the same period last year. Additionally, revenue from operations for the quarter grew by 32.18% year-on-year, reaching ₹8,564 crore.

For the full fiscal year (FY24), BEL reported consolidated revenue from operations of ₹20,268 crore, up 14.28% from ₹17,734 crore in FY23. Net profit for FY24 rose by 33.45% to ₹3,985 crore, compared to ₹2,986 crore in the previous fiscal year.

Impressive Order Book and Export Growth

In FY24, BEL secured orders worth approximately ₹350 billion, including significant defense contracts such as electronic fuses, electronic warfare (EW) systems, communication systems for naval warships, fire control systems, Akash Prime weapon systems, radars, sonars, software-defined radios, night vision devices, and tactical communication systems. The order book increased to ₹760 billion, with an export order book of $407 million, up from $211 million in FY23.

BEL’s exports also witnessed substantial growth, achieving $93 million, reflecting a 92% year-on-year increase. Key export products included transmit and receive (TR) modules, compact multi-purpose advanced stabilization systems (COMPASS), radar and EW systems, medical electronics, and communication equipment.

Key Beneficiary of Defence Indigenization

BEL holds a significant market share of 12% in the overall defense market and nearly 60% in the highly specialized defense electronics segment. Domestic brokerage firm Motilal Oswal expects BEL to remain a key beneficiary of the defense indigenization potential worth ₹5 trillion over the next five years. BEL’s extensive range of products across defense platforms, including radars, simulators, EW systems, electronic fuses, thermal imaging, integrated air command and control systems, border surveillance systems, and counter-drone systems, positions it favorably in the industry.

The share of indigenization in the Indian defense sector has been consistently increasing, and Motilal Oswal anticipates BEL’s revenue market share to remain high at around 12-13%. The brokerage also noted BEL’s continuous efforts to increase exports and non-defense revenue, thereby reducing its dependence on the domestic defense sector alone.

Upgraded to ‘Buy’

In light of BEL’s strong Q4 and FY24 performance, Motilal Oswal has raised its earnings estimates by 21% and 32% to account for the government’s ongoing support for the defense sector, BEL’s increasing market share, better-than-expected gross margins, and improved working capital management.

Motilal Oswal projects a Compound Annual Growth Rate (CAGR) of 19% in sales, 20% in EBITDA, and 22% in Profit After Tax (PAT) over FY24-26. It expects operating cash flow (OCF) and free cash flow (FCF) to remain strong during this period due to effective control over working capital. Furthermore, BEL had a cash surplus of ₹110 billion as of FY24, providing ample scope for further capacity expansion.

The brokerage has valued BEL stock at 35x P/E on two-year forward earnings and revised its target price to ₹310 per share, upgrading the rating from ‘Neutral’ to ‘Buy’.

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Lucrative Ordering Opportunity Highlighted by Nomura

Earlier, Japanese brokerage firm Nomura initiated coverage on BEL with a ‘buy’ rating, setting a target price of ₹300 per share. Nomura highlighted that India’s defense sector presents a lucrative ordering opportunity of $138 billion over FY24-32 due to escalating demand for defense equipment, technologies, and services. This scenario offers significant prospects for companies involved in defense production and technology development.

The brokerage emphasized that India’s defense capital expenditure is expected to rise to 37% of the total budget by FY30, up from the projected 29% in FY25. This increase translates to a cumulative capital outlay of ₹15.5 trillion over FY24-30, indicating substantial growth compared to previous periods.

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