Bharat Electronics’ stock takes wings on order inflow
1 min read 31 Mar 2023, 12:06 PM ISTA series of contracts with BEL over the past few days alleviates investor woes about the languishing order book of the company
PremiumThe Ministry of Defence (MoD) has signed a series of contracts with Bharat Electronics Ltd (BEL) over the past few days amounting to about ₹16,300 crore. This alleviates investor woes about the languishing order book of BEL, which was at a multi-quarter low of ₹50,116 crore in the December quarter (Q3FY23). Shares of BEL rose by 6% in Friday’s morning trade on the National Stock Exchange.
Moreover, there were concerns on whether the company would miss its FY23 order inflow target of ₹20,000 crore by a wide margin. This comes on the back of muted order inflow of ₹3,700 crore in the nine months ended December.
The order inflow from MoD is expected to be the key enabler in BEL maintaining its revenue growth of 15% per annum over the next few years, said analysts at ICICI Securities in a report on 31 March.
Further, BEL’s pipeline also offers comfort. “Next 2-year pipeline is healthy, with sizeable missile orders like QRSAM and LRSAM (or its alternative) and MRSAM expected to pick up FY24E onward," said analysts at Jefferies India in a report on 30 March. QRSAM is quick reaction surface-to-air missile, LRSAM is long range surface-to-air missile and MRSAM is medium range surface-to-air missile.
The country’s thrust towards indigenization augurs well for BEL. “In the past 12-24 months, more than 300 items have been added to the defence import embargo list. BEL manufactures over 190 of the 1,100 in the list," notes Jefferies.
To be sure, execution remains key hereon and investors would do well to track if BEL meets FY23 margin guidance. Any disappointment on that front would dampen investor sentiments. Also, BEL’s expansion in non-defence areas necessitates monitoring. After accounting for today’s rise in share price, BEL stock is down 15% from its 52-week high of ₹114.65 apiece seen in September.
