Bharat Electronics - Growth Levers Intact: Motilal Oswal

Motilal Oswal Report

Despite the reduced majority, we expect that the upcoming government’s policy focus on investment-led growth, capex, infrastructure, manufacturing, and defense will continue. Particularly for the defense sector, the government initiated several initiatives in last three-four years, such as indigenisation, higher private sector participation, and increasing defense exports, and we expect a similar focus to continue going forward too. Accordingly, we continue to like Bharat Electronics Ltd. in the defense space, given its presence across highly specialized defense electronics segment.

The company’s order inflows for FY24 were far ahead of its guidance, thereby hedging it against any slowdown in order inflows in FY25. With a strong order book, stable gross margin and efficient control over working capital, we expect Bharat Electronics to continue to benefit from defense spending.

We thus maintain our estimates and Buy rating on Bharat Electronics with an unchanged target price of Rs 310, based on 35 times two-year forward earnings.

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