BEML Q4 Results Review - Strong Margin Expansion; Revenue Disappoints: Prabhudas Lilladher

Prabhudas Lilladher Report

We revise our FY25E earnings per share estimate of BEML Ltd. by -2.6% factoring in execution of a lower than expected order book and downgrade the rating to ‘Accumulate’ from Buy with a revised target price of Rs 4,004 (Rs 3,345 earlier) given the sharp run up in stock price.

BEML reported mixed quarterly performance with a big miss on revenue (+9.1% YoY to Rs 15.1 billion) and Ebitda margin expansion of 381 bps YoY. Although FY24 order inflows were softer than expectations, the company has a significant opportunity pipeline in rail and metro worth ~Rs 580 billion in FY25 (rail ~Rs 440 billion and metro ~Rs 140 billion) and ~Rs 320 billion in FY26 which can boost the order book.

Prospects include metro cars in Mumbai, Chennai, Patna, among others, as well as Vande Bharat rolling stock. It also has a defence order pipeline of ~Rs 400 billion over the next four-five years across HMVs, ARVS, combat engineering equipment, tank engines, etc. including ~Rs 60 billion in FY25 and Rs 60-90 billion in FY26.

BEML has also tied up with Bharat Electronics to indigenously develop Train Control Management Systems for Grade of Automation 4 (driverless) metro cars.

The company plans to incur capex worth 8-9% of FY24 sales (~Rs 3-3.5 billion) in FY25 to enhance manufacturing capabilities in defence, engines, and rolling stock.

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