Bharat Electronics Stock Ends At Two-Month High On Bullish Analyst Ratings

Shares of Bharat Electronics Ltd. rose for the third straight day after most analysts raised their earnings estimates and target prices for the electronic communication equipment maker, citing steady operating performance and benefits from the ‘Make in India’ initiative.

The company, at an analyst meet, said the impact of lowered margin on nominated projects began in FY20. That, however, will be offset by operating leverage and cost-saving indigenisation benefits. It also expects order flow to increase 15% year-on-year in FY21, with strong outlook in missile systems in the next five to 10 years.

That also prompted analysts to maintain their bullish investment stance on the company.

Shares of Bharat Electronics ended 4.95% higher at Rs 108.2 apiece - the highest in two months. Of the 24 analysts tracking the firm, 19 have ‘buy’ recommendations, four suggest a ‘hold’ and one has a ‘sell’ call. The average of Bloomberg consensus 12-month target price implies an upside of 14.6%.

Here’s what the analysts had to say:

Jefferies

• Maintains ‘buy’ rating; price target at Rs 130 apiece
• Margin at 20% should be sustainable according to the management
• Board approval in place for 8-10% of turnover being invested in R&D
• Non-defence initiatives are interesting though opportunities are hard to quantify
• Market share should improve as Make In India initiative gathers pace

Kotak Institutional Equities

• Maintains ‘buy’ rating; raises price target to Rs 120 from Rs 110 apiece
• Targeting double-digit growth guidance and investing in growing scope of business within defence, civilian and service
• Banking on indigenisation to keep Ebitda margin steady
• Raises FY22 and FY23 earnings estimates by 5% and 6%, respectively
• Remains optimistic due to healthy order backlog, strong pipeline of large projects and stable margins

Motilal Oswal

• Maintains ‘buy’ rating; hikes price target to Rs 130 from Rs 116 apiece
• Steady and strong operating performance to continue
• Impressed with management’s strategic vision as well as commentary on opportunities and margin
• On a strong footing for Make in India programme
• Confident of double-digit growth over the next decade
• Management expects order inflow of Rs 15,000 crore in FY21
• Raises EPS estimates by 3-6% over FY21-23
• Forecasts revenue, Ebitda, PAT compounded annual growth rate of 11%, 7% and 8%, respectively, over FY20-23

Prabhudas Lilladher

• Upgrades to ‘accumulate’ from ‘hold’; raises price target to Rs 110 from Rs 99 apiece
• Strong execution in Q2 and outlook remains positive
• Expects working capital stress to improve in the second half of FY21
• Healthy order book provides revenue visibility
• Raises revenue estimates by 5%, 9% and 12% for FY21, FY22 and FY23, respectively
• Raises profit estimates by 10%, 11% and 14% for FY21, FY22, FY23, respectively

Edelweiss

• Maintains 'buy' rating; price target at Rs 140 apiece
• Management's commentary and guidance reflect much better picture on stability of margins and upside risks to new orders
• Best case lies in crowding up of large systems execution and order awards, which augur well for the company's RoCE over 3-5 years
• Growth, RoCE remain robust
• Risks include entry of private players in core areas, sustained weakness in payment cycles and significant cuts in defence capex.