Shares of Bharat Electronics Ltd (BEL) saw a significant rally of 9.25% on Tuesday, reaching a high of ₹282.80 on the BSE. This rise follows a stellar year where the defence multibagger stock surged by 154%. The strong performance in Q4, driven by robust margins and increased other income, has outperformed market expectations and led to a positive re-evaluation by analysts.
Q4 Earnings Beat Expectations
BEL, a Navratna PSU under the Ministry of Defence, reported a consolidated net profit increase of 30% year-on-year, totaling ₹1,797 crore for Q4. Revenue from operations for the quarter also rose by 32.18% to ₹8,564 crore. For the full fiscal year 2024, BEL’s revenue from operations grew by 14.28% to ₹20,268 crore, while net profit increased by 33.45% to ₹3,985 crore.
The company received orders worth approximately ₹30,000 crore in FY24, surpassing its initial guidance of ₹20,000 crore. The order book now stands at ₹760 billion, including an export order book of $407 million, up from $211 million in FY23. BEL achieved exports of $93 million, marking a 92% increase year-on-year.
Analyst Upgrades and Price Targets
Jefferies and Morgan Stanley have both issued positive outlooks on BEL following the Q4 results. Jefferies has maintained a ‘buy’ rating, raising its target price to ₹305 per share, indicating a potential 18% upside from recent levels. The brokerage firm highlighted BEL’s strong margins and revenue growth, projecting double-digit revenue growth from FY24 to FY26.
Morgan Stanley also remains bullish, assigning an ‘overweight’ rating and increasing its target price to ₹300 per share. The firm noted that operational efficiencies are likely to persist, with EBITDA margin estimates revised upwards to 24-24.5% from the previous 22.5-23%.
Motilal Oswal has upgraded BEL from ‘Neutral’ to ‘Buy’, setting a target price of ₹310 per share. The domestic brokerage expects BEL to benefit significantly from the Indian government’s push for defence indigenisation, projecting a 19% CAGR in sales, 20% in EBITDA, and 22% in PAT over FY24-26.
Advantages and Future Prospects
BEL’s position as a market leader in domestic defence electronics, with a 12% overall market share and a near 60% share in defence electronics, positions it well to capitalize on India’s growing defence expenditure. The company has a diverse product range including radars, electronic warfare systems, communication systems, and more.
Japanese brokerage firm Nomura has initiated coverage on BEL with a ‘buy’ rating and a target price of ₹300 per share. Nomura points to a lucrative ordering opportunity of $138 billion in India’s defence sector from FY24-32, driven by increasing demand for advanced defence equipment and technology.
Key Contracts and Initiatives
In February, BEL secured a deal worth ₹2,269 crore with the Ministry of Defence for the procurement of 11 Shakti warfare systems. Other key orders include electronic fuses, communication systems for naval warships, and various radar and sonar systems. The company is also focusing on increasing exports and non-defence revenue to reduce dependence on domestic defence spending.
BEL’s robust financial performance, strategic position in the defence sector, and positive analyst outlooks have fueled a significant rise in its stock price. With continued government support and a strong order pipeline, BEL appears well-positioned for sustained growth in the coming years. Investors and market watchers will be keenly observing how the company leverages these opportunities to further enhance its market presence and profitability.
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