Expect to acquire orders worth Rs 150-200bn in FY22 – Bharat Electronics
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Bharat Electronics Ltd (BEL) received its biggest-ever export order from Airbus. Ms. Anandi Ramalingam, CMD, Bharat Electronics discussed the contours of this order and the order pipeline with CNBC TV-18 on 23rd November 2021:
- The export order with Airbus under the C295 aircraft program of the Indian government is for the manufacture and supply of the Radar Warning Receiver and Missile Approach Warning System. The order value is USD 90mn.
- The entire system is designed, developed, and manufactured indigenously. It is designed by DRDO and will be manufactured by BEL. It will get integrated with a countermeasure dispensing system which will get supplied by Bharat Dynamics Ltd.
- BEL’s order book stands at Rs 560bn. The Company anticipates order acquisitions worth Rs 150-200 bn in FY22.
- With the products being indigenously designed and developed, the margins would not be strained.
- The company expects to receive export orders worth 25mn Euro from part of the consortium supplying Rafale aircraft to the Indian air force.
- The major part of the radar, the transmit-receive modules (TRMs) are being manufactured by BEL. They had supplied 1,700 modules in FY21. BEL has a pipeline of 8,000 units, of which 4,000 units are likely to be supplied in the near term for 25mn Euros.
- The Domestic order pipeline is very strong. They have orders for electronic warfare systems for the air force amounting to Rs 40bn. The electronic warfare systems for the army amount to Rs 35 bn. It is targeting naval systems orders worth Rs30 bn. They have orders for Akash Prime (Akash army) for which BDL is the lead integrator. But a lot of ground systems and radars will be supplied by BEL, worth Rs 40bn. These orders will be done in the next 6-8 months.
- In addition, many big missile programs are in the pipeline. In the years to come, BEL should be able to acquire orders worth Rs 150-200bn yearly.
Asset Multiplier Comments
- The Government’s Atmanirbhar Bharat plan to focus on infrastructure development indigenously has benefitted companies like Bharat Electronics. The Company got an opportunity to manufacture items that were banned from the Import List by the Government in CY20. In CY21, BEL has expressed interest in 69 items under the Make-II list. Of these 30 are under various stages of development.
- We think a healthy order book, strong order inflows, increasing revenue from exports, and capex of Rs 18 bn over the next 3 years to meet manufacturing needs and R&D would aid long-term revenue and profit growth.
Consensus Estimate: (Source: market screener and Tikr.com websites)
- The closing price of BEL was ₹ 207/- as of 24-November-2021. It traded at 21x/ 18x/ 16x the consensus earnings estimate of ₹ 10/ 11.4/ 12.9 for FY22E/23E/24E respectively.
- The consensus price target is ₹ 242/- which implies a PE multiple of 19x the earnings estimate for FY24E of ₹ 12.9/-
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