Shares of BEML has corrected sharply in the recent rout of the stock market. The PSU miniratna has left brokerage firms divided on over the multibagger considering its muted performance in the September 2024 quarter but outlook remains strong in the longer run considering its rising order book.
BEML reported a marginal decline of 0.75 per cent in its net profit on the year-on-year (YoY) basis at Rs 51.03 crore for the second quarter ended September 30, 2024. However, its revenue from operations stood at dropped 6.2 per cent YoY to Rs 859.84 in the reporting quarter.
BEML’s order book stood at Rs 11,453 crore for the quarter, which constitutes orders worth Rs 2,784 crore executable in the current year and Rs 8,669 crore in the subsequent years. The state-owned company makes machinery and products for industries like aerospace, mining, rail and metro and has clients such as Rail Vikas Nigam, Adani Power and Chennai Metro Rail.
Nirmal Bang Institutional Equities has largely maintained its estimates for FY25 and FY26 and have introduced the FY27 numbers. "We like the company mainly for its improving operational performance, underscored by steady Ebitda margin expansion from 10.9 per cent in FY24 to a projected 15.6 per cent in FY27E," it said.
The company’s order book is also expected to grow at a CAGR of 20 per cent from FY25E to FY27E. In addition, an improving working capital cycle to an estimated 224 days in FY27, reflects enhanced efficiency in collections. BEML’s zero-debt position and favourable growth prospects across segments further strengthen its outlook, it said with a buy rating a target price of Rs 4,732.
Shares of BEML have dropped as much as 31 per cent from its 52-week high at 5,489.15 hit in July 2024. However, the stock finally settled at Rs 3792.75 on Thursday, falling another half a per cent. The total market capitalization of the company stood close to Rs 15,800 crore.
On the contrary, Elara Capital lowered its FY25E earnings by 7 per cent, on delayed execution but retained FY26E earnings estimates. The brokerage expect continued execution challenges in metros and product mix to restrict significant expansion in margin. Order inflows witnessed a significant decline due to high base and delay in receipt of new orders in rail & metro.
"However, we raise our target price to Rs 3,770 from Rs 3,600, but maintain 'sell' as continued execution challenges in metro and product mix to restrict significant expansion in margin. Earnings CAGR of 18 per cent in FY24-27E with an average ROE and ROCE of 14 per cent each in FY25-27E is expect, it said that significant rise in order inflows in rail & metros & armored recovery vehicle may change view.
Rail and metro segment revenue is likely to be subdued this year as major orders booked last year are still in early stages of execution; we expect it to ramp up from FY26. BEML secured Rs 870 crore order for high-speed trains and reportedly L1 for Rs 3,000 crore Chennai metro rolling stock order. However, the order book is likely to close below management’s previous guidance, said PL Capital.
"We believe BEML’s long-term prospects remain strong on the back of healthy order prospects in the modernization of defense vehicles, expansion into higher value defense segments such as engines and aerospace, large tender pipeline for rail & metro rolling stock, and large capacity expansion leading to a ramp-up in execution" it said with an 'accumulate' rating and a target price of Rs 4,332.