BEL soars 5%, hits new high on record turnover in FY24, strong order book

Shares of Bharat Electronics (BEL) hit a new high of Rs 221.40 on the BSE in Tuesday’s intra-day trade amid heavy volumes.  The stock prices shot up after the company said that it has achieved a provision turnover of around Rs 19,700 crore, registering a growth of 13.65 per cent year-on-year (YoY) during the financial year 2023-24 (FY24). The state-owned aerospace and defense reported a turnover of Rs 17,333 crore in FY23.

The stock surpassed its previous high of Rs 216.70 touched on March 7. The average trading volumes of the counter nearly doubled. A combined 44.1 million equity shares changed hands on the NSE and BSE till 10:18 am. In comparison, the S&P BSE Sensex was down 0.15 per cent at 73,903.

As on April 1, 2024, the total order book of BEL stands at around Rs 76,000 crore, providing revenue visibility for the next couple of years. In the fiscal year 2023-24, BEL secured orders worth around Rs 35,000 crore.

Moreover, BEL’s pipeline of fresh orders remains healthy, supported by the Government’s growing capital budget allocation and continued focus on rolling out reforms to increase India’s defence product manufacturing capability and gradually reduce imports. Additionally, large defence offset requirements of foreign suppliers also provide opportunities for business growth over the medium term, according to analysts.

The management said BEL is in sync with the Government’s ‘Make in India’ initiative as indigenisation, procurement from Micro, Small & Medium Enterprises (MSMEs) and Government e Marketplace (GeM) continue to be on thier priority list. BEL will continue to explore new growth opportunities through export initiatives, diversification, capability enhancement, competitiveness and modernization, it added.

Analysts at JM Financial Institutional Securities believe revenue growth will sustain going forward driven by robust order backlog, strong order pipeline, diversification in other segments (hydrogen fuel cell, EV batteries etc), focus on non defence segment and focus on increasing exports revenue.

The brokerage firm remains positive on BEL given strong order backlog, sustained steady margin profile, healthy order prospects (expects to bag cumulative orders worth Rs 50,000 crore in FY25 and FY26), continuous focus on diversification and exports markets and continued indigenisation push by GoI,. It expects revenue and PAT CAGR of 21 per cent and 20 per cent over FY24 - FY26E.

According to ICRA, though competition from the private sector is likely to intensify in the medium-to-long term, BEL’s established track record and large manufacturing capacities with adequate pool of trained manpower and focus on research and development (R&D) will continue to be strong mitigating factors.

ICRA notes that BEL’s consistent investment towards R&D has helped create a strong competitive moat by enabling it to develop latest generation products and services and gradually increasing the indigenisation of its product offerings, which have been the key pillars behind the company’s healthy profit margin.

The stable outlook reflects ICRA’s expectation that BEL’s financial profile is likely to remain strong, supported by its strategic importance as the major supplier of defence electronics equipment to the Indian defence forces and the high sectoral entry barriers, which would limit competition.