Bharat Electronics Q1 Results Review - Good Performance In A Lean Quarter: Nirmal Bang

Nirmal Bang Report

Bharat Electronics Ltd.'s reported Ebitda was higher than our estimate at Rs 9,482 million (versus estimate Rs 8,450 million).

Management guidance for FY25:

1. Maintains double-digit growth outlook (15%).

2. Gross margin seen at ~41-43% and Ebitda margin at ~23-25%.

3. BEL anticipates an order inflow of Rs 250 billion, excluding Rs 300 billion from quick reaction surface-to-air missile. The QRSAM orders are expected in FY26, resulting in an order inflow of Rs 450 billion in FY26.

4. Management anticipates a book-to-bill ratio of 2-3x in the subsequent years.

We anticipate revenue/Ebitda/profit after tax compound annual growth rate of 16%/18%/15% during FY25E-FY26E. The stock is trading at a one-year forward P/E of 43 times, above the five-year average price/earning of 16 times.

We had downgraded both the sector and BEL to sell earlier this month on account of extremely steep valuations relative to sector fundamentals. We maintain ‘Sell’ rating on BEL with a target price of Rs 280, valuing it at 35 times June-26E EPS + 2SD above the long-term average.

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