Bharat Electronics (BEL) reported revenues at Rs. 1671 crore, a decline of 20.5% YoY, below our estimate of Rs. 1740 crore on the back of supply chain disruption affecting execution. Absolute EBITDA for the quarter came in at Rs. 146.7 crore (vs. our estimate of Rs. 208.6 crore), down 57.9% YoY. While EBITDA margins declined ~780 bps YoY to 8.8% (below our estimate of 12%) owing to higher-than-expected other expenses & employee expenses. Consequently, PAT fell 73.6% YoY to Rs. 54.1 crore, impacted by slower execution, higher other expenses and lower other income, which declined 27.7% to Rs. 18.4 crore YoY.
Valuation & Outlook
Overall, execution is expected to remain stable for FY21E while order inflows may get impacted in the medium term due to a delay or deferral in a few projects. BEL is likely to continue its focus to increase contribution from non-defence segment that may contribute ~20% to revenue albeit with lower margins in the next three to five years. Overall strong order book of Rs. 53752 crore continues to provide strong revenue visibility. We expect BEL to report revenue, EBITDA, PAT CAGR of 7.3%, 3.4%, 2.0%, respectively, in FY20-22E. We value BEL at 13.5x on FY22E EPS to arrive at a revised target price of Rs. 105 and maintain our HOLD rating. Any disappointment on execution front may significantly impact the operating performance of BEL.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_BharatElectronics_Q1FY21.pdf
Shares of BHARAT ELECTRONICS LTD. was last trading in BSE at Rs.97.15 as compared to the previous close of Rs. 99.3. The total number of shares traded during the day was 832571 in over 4153 trades.
The stock hit an intraday high of Rs. 99.25 and intraday low of 95.45. The net turnover during the day was Rs. 81039866.