Navratna PSU Bharat Electronics Ltd (BEL) saw its shares rallying over 9 per cent in Tuesday's trade, as its Q4 earnings beat Street estimate led by strong margins and jump in other income. Up-fronting of order inflows led to a beat in overall order inflows for the company.
Gross profit margin has remained strong for BEL since the past three quarters, averaging at 48.5 per cent mainly a function of favourable job mix and stage of execution, analysts said who largely maintained 'Buy' on the stock.
Shares of the aerospace and defence electronics company rose 9.25 per cent to hit a high of Rs 282.80 on BSE. The defence multibagger stock is up 154 per cent in the past one year.
For the March quarter, an increase in other expense was offset by a reduction in employee cost said Nomura India. This translated into an Ebitda margin of 26.7 per cent (Nomura estimate: 23.7 per cent, consensus estimate: 23.8 per cent).
"Increase in other income by 225 per cent YoY also led to the PAT beat of 17 per cent/ 21 per cent versus Nomura/ consensus estimates. Overall, we remain positive on BEL as we expect the secular growth to sustain, driven by its market dominance and increased project sizes, as it further ascends the value chain as a system integrator," Nomura India said.
Nomura India expects BEL to demonstrate a PAT CAGR of 16 per cent over FY23F-FY26F. It suggested a target price of Rs 300 for the defence stock.
Motilal Oswal said the share of indigenisation in the Indian defense sector has been continuously moving up. It said BEL's revenue market share may remain high at around 12-13 per cent. The company is continuously taking initiatives to increase the share of exports and non-defense revenues, it said while incorporating higher margins in its estimates.
"We also increase the valuation multiple to account for a larger market share of BHE, benefits of technology tie-ups, MoUs, and an improving share of exports and non-defense in total revenues. We value BHE at 35 times PE on two-year forward earnings and revise the target price to INR310. We upgrade the stock to BUY from Neutral earlier," Motilal Oswal said.