From the all-time low of Re 0.16 hit in 1999, Bharat Electronics Limited (BEL) has clinched levels of Rs 184 in nearly 25 years. That translates into a return of an exorbitant 1,14,900 per cent. 
 

Can you join the breakneck rally now? Here’s how analysts view the defence PSU: 

Strong order book powers better earnings visibility 

Bharat Electronics, akin to other state-run entities, also ran the marathon in the year gone-by, delivering a return of a splendid 81 per cent. A strong order book is preparing the ground for BEL’s better earnings visibility going forward, say analysts.  

ICICI Securities is bullish on the stock. The brokerage’s target of Rs 203 for the stock implies an upside of 9.7 per cent from the previous close.  

The brokerage has highlighted that the electronic equipment manufacturer’s order inflow for financial year to date, at Rs 25,930 crore, is significantly higher than its guidance of Rs 20,000 crore for the full year. Moreover, the company’s order book can scale to nearly Rs 30,000 crore for FY24, according to ICICI Securities, which maintains that the company may continue receiving orders from various platforms across services.  

“Coupled with robust execution, we believe the company is likely to achieve our higher-than-consensus earning per share,” wrote analysts at the brokerage in its December 2023 report. 

CLSA has retained a ‘buy’ rating on the BEL stock with a target of Rs 207, and raised its 2025-2026 earnings per share (EPS) estimates for the defence equipment maker by 5-7 per cent. 
 

Technical view: Analysts suggest avoiding long positions 

Investors may book partial profits near Rs 188-190 levels, said Jigar S Patel, Senior Manager-Equity Research at Anand Rathi.  He recommends avoiding fresh longs at the current market price. 

“For the last 3–4 weeks, BEL has had a massive bull run after the breakout zone of Rs 150 and is currently placed near the Rs 184 mark. In percentage terms, it comes to a gain of 23 per cent approximately. On the flipside, one needs to be cautious because the previous couple of alternate waves are witnessing Fibonacci ratio clustering near the Rs 188–190 zone, which would be massive resistance to cross,” Patel added. 

Rajesh Ranjan Sinha, Sr. Research Analyst, Bonanza Portfolio is of the view that the company is favourably positioned to capture the larger pie of huge opportunity in Indian defence & space electronics systems/subsystems or components industry which is expected to clock 13-14% CAGR over FY22-27E with the share of defence electronics (in total defence production) increasing to 40-42% by FY27E against current share of 36-37%. BEL is expected to be the key beneficiary of the opportunity led by the indigenization drive and the Make in India programme considering its capital-intensive infrastructure with high technical expertise or strong capabilities in designing, developing, manufacturing and supplying a wide range of strategic electronic products/systems including those involving emerging technologies.

Also, emphasising on its strong order book, the analyst noted that the company has already received orders worth Rs.25,935 crore in FY24 YTD vs. the full year guidance of around Rs.20,000 crore. In the month of December 2023 only, BEL has received over Rs.8,000Crs. By the end of Q2FY24, order book of BEL stood at Rs.687bn (3.9x of FY23 sales) giving a good revenue visibility going ahead. Management has also guided for revenue of Rs.20,300Crs for FY24 at 15% YoY growth.

BEL exports to multiple geographic locations like, Vietnam, Sri Lanka, Oman, the US, Singapore, Nigeria and plans to export in Brazil, Armenia and Kazakhstan. BEL has also diversifying into non-defence like Civil Aviation sector, Anti Drone Systems, Satellite Assembly & Integration, Solar, Railway & Metro solutions, the expert pointed out.