BEL is a consumer durables-to-infrastructure player, operating primarily in three businesses – lighting, consumer durables and engineering and projects (E&P).
The company has powered ahead in size in the recent years, based on the expansion of its E&P business. It continues to command a strong brand name in the appliances and fans businesses.
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In a strategic move, BEL has taken a stake in Starlite Lighting, a CFL manufacturer. As a result, the company’s CFL sales touched Rs100 crore in FY2009.
The consumer durables and lighting businesses have been backed by rapid expansion in the distributor network. As a result of its efforts, BEL has achieved a revenue growth of 28% from FY2007-09.
Outlook and Valuation
We believe BEL is well poised to take advantage of the improving economic scenario. It targets its E&P BU to be the key growth driver going ahead as well.
The company continues to do well in its other Segments too by expanding its distributor network to increase its marketshare. In line with this, in recent quarters, BEL has delivered a strong performance.
As a result, we have revised our EPS estimates upwards for FY2011 to Rs76.4 (earlier Rs72.2). On the bourses, since March 2009, the BEL stock has outperformed the Sensex by a whopping 259% (absolute returns 326%) mainly on the back of better-than-expected business performance.
At Rs 655, the stock is trading at attractive valuations of 10.5x FY2010E 8.6x FY2011 earnings. We reiterate a BUY on the stock with a target price of Rs764, translating into an upside of 16.6%.