Bharat Electronics surges 12% in two days on strong management commentary

Shares of Bharat Electronics (BEL) were up 5 per cent to Rs 107.95 on the BSE in trade on Friday, and have rallied 12 per cent in the past two trading days on strong management commentary. The company has guided for double-digit growth, sustainable margins and better order inflows suggest strong performance in the medium-term. The stock of state-owned defence company hit a 52-week high of Rs 118.45 on August 14, 2020.

For April-September period (H1FY21), BEL had reported 18 per cent year-on-year (YoY) decline in its consolidated net profit at Rs 443 crore, while total revenue from operations remained flat at Rs 4,871 crore over the previous year quarter. The order book stood at Rs 52,148 crore as on October 1, 2020. BEL is zero debt company and is able to maintain working capital without borrowing.

The company is aiming at order inflows of around Rs 15,000 crore for FY21E (vs. Rs 13,000 crore in FY20). It expects orders from avionics package for LCA, Akash weapon system, LRSAM, smart city business, Electronic warfare systems, etc.

BEL, in its virtual analyst meet, highlighted that it expects double digit (10-15 per cent) topline growth over the medium-term and is likely to be able to maintain EBITDA (earnings before interest, taxes, depreciation, and amortization) margins in the range of 20-21 per cent during this period.

“BEL reported a strong all-round performance for Q2FY21 and is expected to maintain similar momentum in H2FY21 as well. A robust order book at Rs 52,700 crore provides revenue visibility over the medium to long term. Strong balance sheet provides reasonable confidence about continued accelerated trajectory,” ICICI Securities said in a note.

Also, the strategy to diversify into non-defence areas, focus on increasing exports and services would aid long term growth and help de-risk its business model.  However, working capital and cash flow situation would be key monitorables in the medium term, the brokerage firm said.

At 09:35 am; BEL was trading 3.5 per cent higher at Rs 106.75, as compared to 0.47 per cent rise in the S&P BSE Sensex. A combined 7.7 million shares changed hands on the counter on the NSE and BSE.