Bharat Electronics will soon issue free shares. The IIFL has a “Buy” tag

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Bharat Electronics (BEL) remains bullish on increased growth opportunities from major national defense procurement programs and expanding civilian application base, the brokerage and research firm noted. national IIFL.

“Investments in R&D and growing localization on large platforms will increase added value, cost competitiveness and support gross margin expansion. Lean cost structure with improved operating profitability and NWC cycle, will help RoE/RoCE improve to 24%/31% by FY25ii; while maintaining a strong FCF and cash vault,” the note reads.

The IIFL estimates that BEL is on track to generate an EPS cagr of 21% in FY22-24ii and is attractively priced in the industry. The stockbroker reiterated its buy rating on the BEL share with a 12-month price target of 363 each.

“Gradually increasing share of localization content in major system orders, favorable sales mix and various cost optimization measures – will help GM recover to 43% in FY23ii (+200 bps YoY) The benign operating leverage and labor costs will help BEL achieve an Ebitda margin of 23% in FY23ii and improve further,” he added.

Last month, PSU Bharat Electronics declared a free issue of equity shares in a ratio of 2:1, meaning an investor will receive two free equity shares for every share held in the company. The company’s board of directors has decided to allocate free shares to shareholders by capitalization of more than 487 crore. Free shares are additional fully paid shares issued by a company to its existing shareholders.

BEL shares are up more than 72% year-on-year, while PSU defense stock is up around 55% year-to-date or year-to-date, against a fall of nearly 1% in the benchmark BSE Sensex index. Bharat Electronics Limited (BEL) is an Indian government-owned aerospace and defense electronics company.

For the first quarter ended June 2022 (Q1FY23), the company’s standalone net profit increased to 431 crore against 11 crore recorded in the corresponding period of the previous year. As of June 30, 2022, the company’s backlog position is approximately 55,333 crores.

The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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