Sharekhan Recommends "Buy" Large Cap Defence PSU Stock, Claims 25% Gains, Stock Soars 310% In 3 Yrs

Sharekhan in its recent report assigns "Buy" to Bharat Electronics Ltd. (BEL) with a target price of Rs 120/share. Considering the given target price, the stock could give up to 25% returns if purchased today at the current market price (CMP). Bharat Electronics is a Defence PSU stock of the Navratna category. It is a large-cap stock having a market valuation of Rs 70,612.46 crore. BEL is expediting efforts to increase non-defence revenue to diversify its business. Further, any breakthrough on export front (currently ~2% of sales) would provide a fillip to its growth, according to Sharekhan.

Bharat Electronics' CMP, 52 Week Low/High, Returns

The BEL stock's CMP is Rs 97/share, trading 0.41% up as compared to the previous close. The stock records its 52 week high on 15th September 2022 at Rs 114.65/share, and 52 week low on 11th May 2022 at Rs 71.92/share, respectively.

The stock has given 4.59% positive return in the past 1 week, however, it has given 4.2% negative return in the past 3 months. It gave 31.4% positive return in the past 1 year. In the past 3 years, it has given 310.65% positive return and 98.04% positive return in the past 5 years.

Valuation - Maintain Buy with an unchanged PT of Rs. 120

According to Sharekhan, BEL's achievement of order inflow guidance towards the end of FY23 allays concerns over the company missing its mark in terms of order inflows. Further, meeting its revenue guidance despite supply-side constraints is also positive. "Based on provisional revenue figures, we expect strong operating performance in Q4FY23 as operating leverage would also kick in; as the company typically achieves highest revenue in its 4th quarter. On the broader perspective, BEL would play a significant role in the successful implementation of the government's Make in India and AtmaNirbhar Bharat initiatives as it is one of the key defence and aerospace players. Further, global defence companies are tying up with indigenous players, as there is a tremendous export potential for engineering services and components sourcing from India, which bodes well for BEL," the brokerage has said.

It added, "BEL has strong manufacturing and R&D base, a robust order book, healthy order prospects, diversifying revenue stream, and strong balance sheet with improving return ratios. We retain a Buy on the stock with an unchanged price target (PT) of Rs. 120, valuing it on FY2025E EPS."

Key Risks

According to Sharekhan, the key risks to the "Buy" call would be, "Delayed order execution and slower pace of fresh orders can affect revenue growth. Higher raw-material prices and shortage of some key components could affect margins going forward."

Disclaimer - The stock has been picked from the brokerage report of Sharekhan. 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 consult with certified experts before making any investment decision.