Target: ₹184

CMP: ₹158.70

Bharat Electronics Ltd (BEL) reported in Q2-FY24 revenue from operations to ₹3,993.30 crore, up 1.2 per cent y-o-y and 13.5 per cent q-o-q. EBITDA stood at ₹1,014 crore, up 16.8 per cent y-o-y and 50.8 per cent q-o-q. EBITDA Margins stood at 25.3 per cent, up 340bps y-o-y and up 630bps q-o-q due to an improvement of 340 bps is seen due to favorable product mix.

PAT stood at ₹812.30 crore, up 26.5 per cent y-o-y and 46.6 per cent q-o-q. BEL has experienced relatively stagnant revenue growth due to disruptions in Karnataka. Furthermore, the effects of these disturbances, coupled with holiday-related spillovers in other regions, have contributed to the observed revenue flatness.

We expect now onwards guided revenue growth of 15-17 per cent would be seen in coming quarter and further we expect 2H24 would be better than H1-24 as execution performance starts improving from the end of the Q3 and peaks at Q4.

We remain bullish on the company, valuing it at a target price of ₹162 with a P/E of 28x using forecasted EPS of INR 5.76 (FY25E). We maintain Buy for the company due to its healthy order book, diversification and export growth.