Bharat Electronics Limited (BEL) is a state-owned defense electronics company in India. It manufactures electronic products and systems for the Indian Army, Navy, and Air Force. BEL has also diversified into areas like homeland security, smart cities, e-governance, space electronics, energy storage, network security, railways, airports, voting machines, telecom, medical electronics, and software. The company delivered robust growth in revenue, EBITDA, and profit for the first nine months of the current fiscal year. Management expects large new orders in the coming quarter and believes BEL can potentially win over Rs. 250 billion in orders each year for the next four years.

1. BHARAT ELECTRONICS
LIMITED
A quick analysis by Mr. Avigyan Mitra

2. Bharat Electronics Limited (BEL) is a
Navratna PSU under the Ministry of
Defence, Government of India. It
manufactures state-of-the-art electronic
products and systems for the Army, Navy
and the Air Force. BEL has also diversified
into various areas like homeland security
solutions, smart cities, e-governance
solutions, space electronics including
satellite integration, energy storage
products including e-vehicle charging
stations, solar, network & cyber security,
railways & metro solutions, airport
solutions, Electronic Voting Machines,
telecom products, passive night vision
devices, medical electronics, composites
and software solutions.
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3. Revenue grew 12% yoy to Rs 41.31bn (3-yr CAGR of 22%)
& came 5% ahead of consensus estimates. (in line with PC
estimates)
Order backlog stood at Rs 501bn (-11% yoy, 3-yr CAGR of
-3%). Implied order inflow for the quarter was at Rs
13.7bn, -76% yoy.
Gross profit increased 15% yoy as gross margins
improved 109bps yoy to 41.5%.
EBITDA increased to Rs 8.5bn, +4% yoy (-8%/ -1% vs PC/
Consensus estimate, 3-yr CAGR of 34%). EBITDA margin
contracted by 160bps yoy to 20.7% (-183bps/ -128bps vs
PC/ Consensus estimate) as other expenses as % of sales
jumped 259bps yoy.
Recurring PAT increased 3% yoy to Rs 5.9bn (-11%/ -6% vs
PC/ Consensus estimate, 3-yr CAGR of 40%) as other
income was down 3% yoy while depreciation increased
9% yoy.
Upgrade in revenue growth guidance for FY23 & FY24 to
15-20% (+ve bias for upper end)
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Slide Subtitle

4. Major orders expected in Q4FY23:
1) AKASH Prime missile order worth Rs
40bn,
2) Himshakti Electronic Warfare (EW)
worth Rs 32bn,
3) BMP-II Upgrades worth Rs 18bn,
4) Arudhra Radar worth Rs 30bn,
5) AMC contracts for AKASH/ IACCS worth Rs
6bn,
6) EW suites of Mi-17 helicopters worth Rs 15bn.
In addition, BEL has prospects worth Rs 700-
800bn are in pipeline over the next 3 years which
includes, i) EW systems: Rs 200bn, ii) Missiles
systems (QRSAM, LRSAM, MRSAM): Rs 400-500bn,
iii) Naval Equipment (Radar, Sonar, Combat
management system, and communication
system): Rs 200bn, iv) Non-defence biz (EVM/
VVPAT, Smart Infra, Mobility, Medical Electronics &
exports): Rs 80-100bn and vi) RF/ IR seekers,
Unmanned systems, glide bombs & ammunition
fuses.
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10. • Delay in order
finalization,
• Gross margin dilution
• Higher competitive
intensity
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11. • Bharat Electronics (BEL) has delivered robust
operating performance during 9MFY23 with
Sales/ EBITDA/ PAT growth of 24%/ 28%/
36% YoY respectively
• Management expects order inflow worth Rs
140-160bn in Q4FY23 as it has concluded
P&C for contracts worth Rs 120bn
• We believe that BEL is entering in a phase
where it could potentially win > Rs 250bn
worth of orders every year for the next four
years, as large projects such as QRSAM,
MRSAM, Akash Prime and LRSAM become
due for award over FY22-25.
• We also think, EBITDA margin to move
upward of 23% over FY24-FY25 due to
improved learning curve for previous
technology absorption programs, better
operating leverage and the defence
indigenization mandate which will
create a domestic ecosystem, resulting
in lower procurement costs and faster
approvals.
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