Bharat Dynamics - Pick-Up In Execution May Lead To An Upside In Revenue: ICICI Securities

ICICI Securities Report

While FY24 revenue is likely to be largely aided by Bharat Dynamics Ltd. the company recouping the shortfall of about Rs 7 billion in FY23, we expect the pick-up in execution due to Akash and Astra missiles to aid revenue growth post FY25EWe expect margin to remain robust at the upper end of the guidance of 20-23%, mainly due to the execution of platforms with higher indigenisation.

While Bharat Dynamics’ current orderbook may be executed over the next three-four years, we see further inflow from quick reaction surface-to-air missile, medium range surface to air missile and production orders for other platforms are currently under development.

Overall, the focus of the government in augmenting rocket force along the border implies missile/rocket programmes may be expedited.

On earnings front, we expect Ebitda compound annual growth rate of 36% through to FY27E and earnings per share to improve to a sustainable range of Rs 70-75/share by FY27E.

We roll over our discounted cash flow model to FY32, resulting in a revised target price of Rs 1,500/share (earlier Rs 1,325/share).

Our revised target price implies price/earning of 30 times/23 times FY25E/FY26E EPS. Maintain 'Buy'.

Key Risks:

• Delay in receipt of components and parts due to ongoing Israel – Palestine skirmish

• Execution delay in key platforms such as surface-to-air missiles and Torpedoes

• Higher LD provisioning

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