Nirmal Bang upgrades Bharat Electronics shares; JM & Macquarie remain positive on stock

Brokerage firm Nirmal Bang Institutional Equities has upgraded Bharat Electronics post its results for the December 2024 quarter on the back of strong earnings, robust order book, positive guidance from the company management and reasonable valuations post correction.

The key metrics were higher than estimates and the major orders executed during the quarter included critical defence and civilian projects, said Nirmal Bang. The company highlighted its diversification into non-defence domains. While the orderbook is likely to swell up by 1.4 per cent in FY25 the book to bill ratio is expected to be lower at 3.2 in FY25 from 3.7 in FY24, it said.

In its guidance for FY25, management maintains a double-digit growth outlook of 15 per cent, while gross margins are seen at 40-42 per cent and Ebitda margins at 23-25 per cent.

"We believe that BEL will exceed its FY25 guidance, led by a better product mix without supply chain issues. The stock is trading at a 1-year forward P/E of 29.9 times, above the 5-year average P/E of 19.3 times. The stock has corrected from its 52-week high. We have upgraded the stock to 'buy' from 'hold' with a target price of Rs 326," Nirmal Bang added.

Bharat Electronics (BEL) reported a beat on expectations and higher on a year-on-year basis across all parameters. The state-run defence player reported a 47.3 per cent YoY on net profit at Rs 1,316 crore, while revenue for the quarter increased 39 per cent YoY to Rs 5,756 crore.

The Nifty 50 constituent's Ebitda surged 57.5 per cent YoY to Rs 1,653 crore, while Ebitda for the quarter increased to 28.7 per cent. At the end of the December quarter, BEL's total order book stood at Rs 71,100 crore. BEL stated that its order inflow for financial year 2025 stood at Rs 10,800 crore.

Macquarie is also positive on BEL as the company management maintains FY25 guidance. BEL continued to demonstrate healthy execution trends and submarine component order could be another key order, said the overseas brokerage. Large-value orders are line-up for FY26 (Rs 25,000-26,000 crore. Macquarie has an 'outperform' rating on BEL with a target price of Rs 350.

Shares of Bharat Electronics Ltd (BEL) jumped about 3.5 per cent to Rs 288.60 on Friday, as the total market capitalization of the company topped Rs 2.1 lakh crore mark. The stock had settled at Rs 278.90 in Thursday's session. However, the stock is still 15 per cent down from its 52-week high at Rs 340.35 hit in July 2024.

JM Financial remains positive on BEL given strong order backlog providing revenue visibility, sustained steady margin profile, healthy order prospects, increasing business opportunity from Indian Navy, continuous focus on diversification & exports markets and indigenisation push by GoI.

We expect revenue and PAT CAGR of 17 per cent and 16 per cent over FY24-27E, respectively," it added with a 'buy' rating on the stock with target of Rs 360, valuing it at 42 times FY27E. However, JM Financial cited lower budget allocation towards defence and delay in ordering activity as key risks.

BEL reported a strong financial performance during the quarter, registering growth across all major fronts. The company surpassed estimates, demonstrating its strong operational capabilities by outperforming market expectations. However, margins declined sequentially due to increased expenditure, said Palak Devadiga, Research Analyst at StoxBox.

"Despite a robust surge in PAT and a healthy order book reflecting resilience and sustained market demand, order inflows for the financial year stood at less than half of the stated guidance of Rs. 25,000 crores. BEL’s strong order book provides significant potential for future revenue generation while effectively managing operational challenges. The company is expected to focus on securing additional defense and government contracts to sustain its financial strength and growth momentum," she added.