Shares of Bharat Electronics closed 2.7% at Rs 108 on October 27 after the company reported solid earnings for the quarter that ended September 30, with strong revenue visibility supported by healthy orders.

The company’s standalone profit after tax of Rs 611.05 crore was down 0.25% year-on-year, impacted by higher input costs. Standalone operating income rose 7.8% year-on-year to Rs 3,946 crore on healthy order fulfilment.
Navratna Defence PSU said its order status as of October 1, 2022, is Rs 52,795 crore. Analysts maintained a “buy” rating on the stock.

Arafat Saiyed, the senior research analyst at Reliance Securities, said: “Bharat Electronics performed well in a challenging second quarter of fiscal 2023. The order book was 3.1 times its TTM (trailing 12 months) revenue, providing healthy revenue visibility. “However, order inflow for Q2FY23 fell by 62% to Rs 1,420 crore.

On an operational level, EBITDA was flat at Rs 856 crore, with margins down 171bps YoY to 21.68% in September FY23 quarter, close to higher range management guidance for FY20-22 %.

In the half year ended September 30, standalone profit rose 67% to Rs 1,042.5 crore, while operating income rose 33% year-on-year to Rs 7,058.6 crore.

Reliance Securities is positive on BEL’s long-term prospects for strong defence spending, expertise and relationships with government entities, and diversification of non-defence businesses.

The brokerage expects double-digit growth for the company over the next few years, helped by business opportunities in the defence and non-defence sectors.

It said a debt-free balance sheet, efficient working capital management, adequate R&D spending, technology adoption, a track record of timely execution of large projects, strong cash flow and prudent capital allocation bode well for the company. Prabhudas Lilladher also has a “buy” rating on the stock with a price target of Rs 125.