Airborne Electronic systems to HAL to be delivered during FY23-FY28 – Bharat Electronics
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Excerpts of an interview with Ms. Anandi Ramalingam, CMD of Bharat Electronics Ltd (BEL) with CNBC-TV18 on 17th December 2021:
- BEL received an order worth Rs 24bn from Hindustan Aeronautics Ltd (HAL) for the manufacture and supply of 20 types of airborne electronic systems to be fitted on the fighter aircraft, Tejas. This is the largest avionics order for BEL.
- The order will be executed during FY23-28. The order acquisition in FY22 to date stands at Rs 100bn.
- Margins will not be strained due to receipt of the new order. The company maintains its guidance of EBITDA margin of 22-24% for FY22 and FY23E.
- There could be some revenue from the new order in FY22, but a majority of it will accrue from FY23.
- Order acquisition guidance for FY22 stands at Rs 150-170 bn. There could be a change of order acquisition being higher than the guidance.
- The non-defence business contributed ~10% to total revenues, which the company intends to increase to 20-25%. The CMD expects non-defence revenue to be 8-10% of total revenues in FY22. She is hopeful of non-defence contribution increasing to 20-25% by FY24E.
- BEL plans to diversify into metro, rail, and airport authorities businesses. From Delhi metro, BEL has received a trial order. As soon as the trial order is completed, BEL can start booking for a larger share of the orders.
- The newer civilian businesses require a bit of customisation, for which development work is ongoing.
Asset Multiplier Comments
- In FY21, 79% of the total turnover was from indigenous products. 21% of the revenues were generated from products manufactured through Transfer of Technology from foreign OEMs.
- Defence, being the mainstay of BEL, has contributed 78% of Sales revenue in FY21 as against 82% in FY20, with the balance 22% coming from the non-defence segment.
- Non defense segments’ contribution to the total revenue has increased from 15% in FY81 to 22% in FY21.
- The company expects an order inflow of Rs 520-650 bn for the next 3 years. Healthy order book, strong order inflows expected, diversification into non-defence segments like healthcare, metro, Electric Vehicles, and Electronic Warfare gives us the confidence of BEL achieving healthy revenue growth.
Consensus Estimate: (Source: market screener and investing.com websites)
- The closing price of BEL was ₹ 195/- as of 20-December-2021. It traded at 20x/ 17x/ 15x the EPS estimates of ₹ 9.9/ 11.3/ 12.9/- for FY22E/FY23E/FY24E respectively.
- The consensus target price of ₹ 218/- implies a P/E Multiple of 17x on FY24 EPS estimate of ₹ 12.9/-.
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