BHARAT ELECTRONICS
Reco price: Rs 1,572
Target price: Rs 1,850
Bharat Electronics reported in-line sales (up 11 per cent yoy). Contribution margin declined (230 basis points yoy) but was in line with full-year expectation. Higher employee cost (includes Rs 24 crore VRS costs) and other expenses led to sharply lower Ebitda margin (560 bps yoy decline) and Ebitda (Rs 41 crore). Higher other income boosted net profit to Rs 125 crore, up 20 per cent yoy. Kotak has revised its EPS estimates to Rs 132.8 from Rs 133.8 for FY13 on slightly lower execution assumption compensated by higher other income. Factors like acyclical demand, attractive valuations (11.6 times FY13 estimated EPS), strong cash position and large unexecuted backlog are some of its key positives. Maintain add.
— Kotak Institutional Equities
