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Bharat Electronics
Prospects remain strong
BEL’s FY11 numbers were a tad disappointing on revenues, but were offset by a
3x jump in order inflows. We believe future prospects remain strong, with an
order book that doubled in the past year and a pipeline that remains strong. We
believe BEL is the best way to play the Indian defence story. We maintain a Buy.
FY11 revenue disappointment offset by strong inflows
Bharat Electronics reported a turnover of Rs56.3bn in FY11, 5% lower than our forecast of
Rs58bn and implying 5% yoy growth. PAT for the full year was Rs8bn, up 8% yoy. For 4Q11,
turnover was Rs23.6bn, representing 23% yoy growth, while PAT more than doubled to
Rs4.5bn. While the turnover was a bit disappointing as BEL was unable to despatch some
orders, order inflows were a big surprise, with BEL reporting inflows of Rs180bn, almost 3x
FY10 inflows of Rs61.8bn.
Order book reaches a new trajectory; pipeline remains strong
BEL doubled its order book in the past year from Rs114bn to Rs236bn. Its current order book
implies 3.8x FY12F sales, based on our sales forecasts, and provides strong visibility in
terms of future revenue The largest recent order was the RS36bn order for Akash missiles.
However, BEL is the system integrator for this project and c60% of the order value will be
direct BEL products and the remainder will be outsourced. BEL says it is looking for a
possible Rs700bn opportunity in the next three years. Even if half of that materialises, it
would mean orders worth Rs350bn over the next three years. The company expects orders
of Rs100bn in FY12, including an additional Akash order of Rs120bn (along with an order
from Bharat Dynamics Ltd, an unlisted defence public sector unit).
We believe BEL is the best way to play the Indian defence story; maintain Buy
We trim our FY12F and FY13F earnings 12-18%, with FY12F in line with management
guidance of revenues of Rs62bn. We have turned conservative in our margin assumptions.
However, our target price is not affected much, as, given BEL’s strong order book, we
increase our medium-term growth forecast in our DCF-based TP of Rs2105. We believe BEL
offers the best way to play the Indian defence capex story. We maintain our Buy rating.
Based on our forecasts, the stock trades at 16x FY12F earnings and 14x FY13F earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharat Electronics
Prospects remain strong
BEL’s FY11 numbers were a tad disappointing on revenues, but were offset by a
3x jump in order inflows. We believe future prospects remain strong, with an
order book that doubled in the past year and a pipeline that remains strong. We
believe BEL is the best way to play the Indian defence story. We maintain a Buy.
FY11 revenue disappointment offset by strong inflows
Bharat Electronics reported a turnover of Rs56.3bn in FY11, 5% lower than our forecast of
Rs58bn and implying 5% yoy growth. PAT for the full year was Rs8bn, up 8% yoy. For 4Q11,
turnover was Rs23.6bn, representing 23% yoy growth, while PAT more than doubled to
Rs4.5bn. While the turnover was a bit disappointing as BEL was unable to despatch some
orders, order inflows were a big surprise, with BEL reporting inflows of Rs180bn, almost 3x
FY10 inflows of Rs61.8bn.
Order book reaches a new trajectory; pipeline remains strong
BEL doubled its order book in the past year from Rs114bn to Rs236bn. Its current order book
implies 3.8x FY12F sales, based on our sales forecasts, and provides strong visibility in
terms of future revenue The largest recent order was the RS36bn order for Akash missiles.
However, BEL is the system integrator for this project and c60% of the order value will be
direct BEL products and the remainder will be outsourced. BEL says it is looking for a
possible Rs700bn opportunity in the next three years. Even if half of that materialises, it
would mean orders worth Rs350bn over the next three years. The company expects orders
of Rs100bn in FY12, including an additional Akash order of Rs120bn (along with an order
from Bharat Dynamics Ltd, an unlisted defence public sector unit).
We believe BEL is the best way to play the Indian defence story; maintain Buy
We trim our FY12F and FY13F earnings 12-18%, with FY12F in line with management
guidance of revenues of Rs62bn. We have turned conservative in our margin assumptions.
However, our target price is not affected much, as, given BEL’s strong order book, we
increase our medium-term growth forecast in our DCF-based TP of Rs2105. We believe BEL
offers the best way to play the Indian defence capex story. We maintain our Buy rating.
Based on our forecasts, the stock trades at 16x FY12F earnings and 14x FY13F earnings.
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