Bharat Electronics Q3 Results Review - Higher Margins Drive Net Profit Beat; Growth Priced In: Motilal Oswal

Motilal Oswal Report

Bharat Electronic Ltd.'s Q3 FY24 Ebitda margin and profit after tax came in ahead of our estimates despite weak revenue growth. Near-term challenges in the supply chain affected the company's revenue growth.

Order inflows surpassed the company’s guidance due to the up-fronting of orders during the quarter. We expect Bharat Electronic to be a key beneficiary of the increasing defense indigenization.

However, we believe the current stock price already bakes in 15%/16% compound annual growth rate over FY23-26 in order inflows/revenue, including large orders such as quick reaction surface-to-air missile, hence lacks re-rating potential in the near term.

The finalisation of large orders will be positive for the company; however, they will also have an elongated execution period.

We, thus, maintain our 'Neutral' rating on Bharat Electronic with a revised target price of Rs 190 based on 29 times March 26E earning per share and would look for better entry points in the stock.

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