Bharat Electronics Ltd. (BEL) is one of India's leading public sector enterprises engaged in the design, development and manufacture of electronic products for defence, aerospace, civilian and export markets. The company has a diversified portfolio of products such as radars, communication systems, electronic warfare systems, missile systems, naval systems, avionics, electro-optics and smart city solutions.
BEL has been consistently delivering strong financial performance over the years. In the third quarter of fiscal year 2022-23 (Q3FY23), the company reported a revenue growth of 16% year-on-year (YoY) to Rs 4,211.76 crore and a net profit growth of 21% YoY to Rs 1,061.77 crore. The company also improved its operating margin to 28% from 26% in Q3FY22.
The company has a robust order book of Rs 54,798 crore as on December 31, 2022, which provides revenue visibility for the next three to four years. The company has also been winning new orders from domestic and international customers in various segments such as radars, communication systems, missile systems and smart city solutions.
The company has been investing in research and development (R&D) to enhance its technological capabilities and product portfolio. The company spent Rs 1,271 crore on R&D in FY22 (9 months), which was 10% of its revenue. The company has also been collaborating with various academic institutions and research organizations to develop innovative solutions for emerging needs.
The company has been paying regular dividends to its shareholders and has maintained a dividend payout ratio of around 40%. The company declared an interim dividend of Rs 1.40 per share for FY23 (9 months), which translates into a dividend yield of 1.61%. The company also announced a buyback of up to Rs 2,000 crore worth of shares at a price of Rs 180 per share.
The company's share price has been trading in a range-bound manner for the past few months due to market volatility and sectoral rotation. However, the long-term outlook for the company remains positive due to its strong fundamentals, growth prospects and attractive valuation.
Based on various valuation methods such as discounted cash flow (DCF), relative valuation (P/E ratio) and dividend discount model (DDM), we have arrived at an average target price of Rs 120 for BEL's share for FY24 end. This implies an upside potential of around 25% from the current level of Rs 96.
However, there are certain risks that could affect our forecast such as geopolitical uncertainties, delays or cancellations in orders or projects execution issues. Therefore we advise investors to exercise caution while investing in BEL's shares.
Disclaimer: This blog post is for informational purposes only and does not constitute any investment advice or recommendation. Investors should do their own research before making any investment decision.
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