NSE₹Financial outlook₹Key risks and concernsShares of Bharat Electronics Ltd. (BEL) were trading with gains of 3% on Friday, June 7.
The stock has recovered some ground after declining as much as 20% on June 4.
Further, the company had a cash surplus of11,000 crore as of FY24, providing scope for further capacity expansion.A slowdown in order inflows from the defense and non-defense segments, increased competition, further delays in finalisation of large tenders, a sharp rise in commodity prices and delays in payments from MoD can adversely impact our estimates on revenues, margins and cash flows, Motilal noted.Global broking firm CLSA has recently downgraded BEL to 'Outperform' from its earlier rating of 'Buy'.
This was among the first downgrades within the PSU space after the unexpected outcome of the Lok Sabha election.CLSA though, has raised its price target on Bharat Electronics to ₹294 from ₹207 per share earlier.
The brokerage wrote in its note that expensive valuations leave little space for execution error among such companies.Shares of Bharat Electronics, even after Tuesday's drop, have rallied 50% so far this year and have risen 140% in the last 12 months.
NSE
₹
Financial outlook
₹
Key risks and concerns
Shares of Bharat Electronics Ltd. (BEL) were trading with gains of 3% on Friday, June 7. The stock has recovered some ground after declining as much as 20% on June 4. Motilal Oswal continues to like BEL in the defense space, given its presence across highly specialised defense electronics segment.The domestic brokerage firm said that BEL's order inflows for the financial year 2024 were far ahead of its guidance, thereby hedging it against any slowdown in order inflows in FY25.Despite 2024 Lok Sabha election results denying a clear majority to the BJP, Motilal expects that the upcoming government's policy focus on investment-led growth, capex, infrastructure, manufacturing, and defense will continue.Particularly for the defense sector, the government initiated several initiatives in last 3-4 years, such as indigenisation, higher private sector participation, and increasing defense exports, and Motilal expects a similar focus to continue going forward too.Accordingly, the brokerage expects BEL to remain a key beneficiary of continued government spending on defence, improved market share, technology tie-ups, and an improving share of exports and non-defense in total revenues."With a strong order book, stable gross margin and efficient control over working capital, we expect BEL to continue to benefit from defense spending," it said while maintaining a 'Buy' rating on BEL with a target price of310 per share.Motilal highlighted in its note that the company has re-rated in the last two years on improving share of BEL in the overall defence capex and the possibility of BEL improving this from current 12.6% levels going forward as against historical share of 8-9% during FY11-18.The brokerage has maintained its estimates for the company and expects a CAGR of 19%, 20%, and 22% in sales, EBITDA, and profit over FY24-26 estimates. Further, the company had a cash surplus of11,000 crore as of FY24, providing scope for further capacity expansion.A slowdown in order inflows from the defense and non-defense segments, increased competition, further delays in finalisation of large tenders, a sharp rise in commodity prices and delays in payments from MoD can adversely impact our estimates on revenues, margins and cash flows, Motilal noted.Global broking firm CLSA has recently downgraded BEL to 'Outperform' from its earlier rating of 'Buy'. This was among the first downgrades within the PSU space after the unexpected outcome of the Lok Sabha election.CLSA though, has raised its price target on Bharat Electronics to ₹294 from ₹207 per share earlier. The brokerage wrote in its note that expensive valuations leave little space for execution error among such companies.Shares of Bharat Electronics, even after Tuesday's drop, have rallied 50% so far this year and have risen 140% in the last 12 months.
