Buy Bharat Electronics, target price Rs 195: Motilal Oswal

Motilal Oswal has buy call on Bharat Electronics Ltd. with a target price of Rs 195. The current market price of Bharat Electronics Ltd. is Rs 171.25. Time period given by analyst is one year when Bharat Electronics Ltd. price can reach defined target.

Bharat Electronics Ltd., incorporated in the year 1954, is a Large Cap company (having a market cap of Rs 41373.35 Crore) operating in Defence sector.

Financials
For the quarter ended 31-03-2021, the company reported a Consolidated Total Income of Rs 6974.98 Crore, up 197.58 % from last quarter Total Income of Rs 2343.90 Crore and up 19.32 % from last year same quarter Total Income of Rs 5845.41 Crore. Company reported net profit after tax of Rs 1355.73 Crore in latest quarter.


Investment Rationale
The brokerage forecasts revenue/EBITDA/PAT CAGR of 11%/9%/11% over FY21-24E. It has built in a sufficient margin cushion as it assumes an EBITDA margin of 21.7%/21.2% by FY22E/FY23E (v/s 22.6% reported in FY21). The revised TP stands at INR195/share (18x FY23E EPS). At the CMP, the stock trades at 17x/16x FY22E/FY23E P/E, despite having an RoE/RoCE of ~19%/20%, dividend yield of ~3%, and FCF yield of 2-4%. Higher growth in the non-Defense business poses an upside risk , while working capital deterioration poses a key downside risk to valuations

Promoter/FII Holdings
Promoters held 51.1 per cent stake in the company as of March 31, 2021, while FIIs held 11.6 per cent, DIIs 30.2 per cent and public and others 7.1 per cent.