BackBharat Electronics give mixed performance in Q3, to pay 60% interim dividend. What should investors do?
In Q3FY23, BEL's edged higher to ₹598.77 crore on a standalone basis from ₹583.37 crore in Q3FY22, however, were lower from ₹611.05 crore in September 2022 quarter. Meanwhile, revenue came in at ₹4,064.90 crore up from ₹3,660.84 crore in Q3FY22 and ₹3,907.35 crore in Q2FY23.
PremiumGovernment-owned aerospace and defence electronics company, Bharat Electronics (BEL) missed estimates in terms of profitability during the third quarter of FY23. Also, higher raw material costs impacted EBITDA margins. On the positive front, revenues were in line with expectations. Further, the company has declared an interim dividend of 60%.
In Q3FY23, BEL's edged higher to ₹598.77 crore on a standalone basis from ₹583.37 crore in the same period a year ago, however, were lower from ₹611.05 crore in September 2022 quarter. Meanwhile, revenue from operations came in at ₹4,064.90 crore up from ₹3,660.84 crore in Q3FY22 and ₹3,907.35 crore in Q2FY23.
On Saturday, the company's board recommended an interim dividend of Rs. 0.60 per share (on face value of ₹1 each) on the enhanced share capital of the company post Bonus Issue of equity shares in Sept 2022. The said dividend will be payable to all the eligible shareholders holding shares as of the record date i.e. 10th Feb. 2023.
Last week, on Friday, ahead of the earnings, BEL shares tumbled by 4.94% to end at ₹94.30 apiece on BSE.
According to ICICI Direct, Bharat Electronics revenue came in line with estimates, alongside higher than expected raw material costs which impacted margins.
The brokerage said, "revenue increased 11.8% YoY (up 4.7% QoQ) to ₹4,131.0 crore; largely in line with estimates. The growth was primarily driven by better execution." It added that the order backlog was at ₹50,116 crore as of December 2022 end (2.9x TTM revenues). Implied order inflows were at ₹1,452 crore during Q3FY23 and ₹3,736 during 9MFY23.
Further, as per the brokerage, the EBITDA margin contracted 160 bps YoY (-103 bps QoQ) to 20.7%; lower than their estimate of 22.2% --- primarily on account of higher than expected raw material cost. In terms of profitability, PAT increased 2.6% YoY to ₹598.8 crore against their estimates of ₹653.1 crore --- primarily due to lower-than-expected OPM.
What should investors do?
ICICI Direct's note said, "overall, expected double-digit revenue, order inflow growth, sustained margins, and strong order book to ensure better performance." Adding, the note said, "We remain long-term positive and retain our BUY rating on the stock." The brokerage has set a target price of ₹130 on Bharat Electronics.
Among key triggers for the future performance as per the brokerage are:
- Strategy to diversify into non-defence areas, focus on increasing exports and services share would aid long term growth and help de-risk its business
- Strong order pipeline in FY23-24E
- ICICI Direct expects revenue, and EBITDA to grow at a CAGR of 18.5%, and 20.1%, respectively, in FY22-FY24E aided by sustained margins at ~22%
- Strong balance sheet, double-digit returns ratios
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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