Buy This Defense Sector Navratna PSU Stock For Robust 21% Gains, Says Prabhudas Lilladher

Prabhiudas Lilladher maintains a "Buy" call on Bharat Electronics Limited (BEL) for a 21% potential upside from its current level with a target price of Rs 125 per share. BEL is a large cap defence sector Navratna PSU company under the Ministry of Defence, Government of India. It manufactures state-of-the-art electronic products and systems for the Army, Navy and Air Force. BEL has also diversified into various areas.

The company's Non-Defence diversification is gathering pace as BEL has signed an MoU with Triton Electric Vehicle (TEV) for manufacturing. Hydrogen Fuel cells with technology transfer from TEV. BEL bagged an order worth Rs80.6bn from Triton Electric Vehicle India Pvt Ltd. for supplying Li-Ion Battery Packs.

Stock Outlook & Returns on investmen

The stock of the company last traded at Rs 103.55 per share, down 4.07% from its previous close on NSE. Its 52-week low level is Rs 61.15 as on 29 October 2021, and its 52-week high is Rs 114.65 as on 16 September 2022, respectively. It has a market cap of Rs 75,692.76 crore.

The stock in 5 days surged by 2.73%, and fell by 4.52% in 1 month, respectively. Whereas, it has given 15.61% in the past 3 months. Over the past 1 year, it has given 51.61% positive return. In the past 3 years, it has given a multibagger return of 166.54%, and in the past 5 years, it has given 80.3% positive return.

MoU signed for manufacturing of Hydrogen Fuel cell

BEL recently signed a MoU with TEV for manufacturing hydrogen fuel cell and technology transfer from TEV, which will target domestic markets and mutually agreed export markets. The MoU aims at tapping demand for clean energy solutions for various applications including for E- Mobility, by leveraging Government of India's thrust for adoption of clean energy fuels for applications in transport, energy storage etc. We believe MoU is likely to benefit BEL in long run for tapping the opportunity arising from energy transition (such as use of hydrogen).

Order for supply of battery packs for electrical vehicle

Additionally, BEL has bagged an order from Triton Electric Vehicle India Pvt Ltd. for supply of 300 KW Li-Ion Battery Packs for its Semi-truck project in India at an estimated value of Rs80.6bn. The battery packs will be manufactured in Pune units and are expected to be delivered in 24 months commencing from Jan-23. TEV has handed purchase order for first-off quantity with 100% advance payment and BEL will deliver the first-off quantity by Nov-22.

Triton Electric Vehicle (TEV)

TEV is an electric vehicle company headquartered in USA. The company has recently forayed into Hydrogen run vehicles and has started the journey of manufacturing Hydrogen-run Two-Wheelers, Three-Wheelers and Buses. Company has recently set up its R&D centre and manufacturing facility in India with best-in-class infrastructure. Triton Electric Vehicle India Pvt Ltd. is a part of Triton electric Vehicle LLS, USA

Maintain ‘Buy’ rating with a target price of Rs 125 per share

With the recent MoU in EV space, BEL is moving towards its strategy of diversifying into non-defence space (that accounts for ~10% of total revenue; management targets for 25% in long run) likely to be value accretive for the company in long run. "We reiterate our positive stance on long term growth story of BEL given 1) its strong order backlog, 2) order pipeline and 3) diversification in newer business verticals like EV battery, medical equipments, hydrogen fuel cell, metro, focus on export markets, government focus on product indigenization etc. We expect BEL to report revenue and PAT CAGR of 16.6%/19.1% from FY22 to FY25E. The stock is currently trading at PE of 27.0x/22.6x/19.5x FY23/24/25E. We roll forward our Target Price to FY25E with revised Target Price of Rs 125 (Rs98 earlier) valuing it at 23x FY25E EPS. Maintain 'Buy' rating," the brokerage has said..

Disclaimer

The stock has been picked from the brokerage report of Prabhiudas Lilladher. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.