BEL disappointed in the first nine months of FY09 and recorded a revenue growth of 4%. In the fourth quarter, as per our estimates, the company managed to report a 23% rise in turnover.
The skewness in quarterly distribution of revenues has continues in FY09. The fourth quarter contributed 60% of revenues in FY09 as against 56% in FY08.
PBT margins for the fourth declined from 34.8% in Q4 FY08 to 26.3% in Q4 FY09.
The order book as on 01 April 2009 is estimated to be around Rs100 billion, which is up 5.8%. Order backlog provides a revenue visibility of 26 months. However, for the year, we estimate order inflows to have grown by 10% in FY09.
BEL is looking for new growth opportunities through organic or inorganic growth. In this direction, the company is discussing with reputed foreign and Indian players for forming joint venture companies in India, in the areas of defence electronics, namely electro optics, airborne electronic warfare, missile electronics and guidance systems etc.
At the current price, the stock is trading at 8.3x FY10E earnings and has outperformed the capital goods index in view of its non-cyclical business model.
Given the sustained outperformance by the stock, we do not see significant upside from current levels. We maintain ACCUMULATE with a DCF based target price of Rs950.