Bharat Electronics Ltd.    
10 Aug 2017
A strong moat in defence electronics drives Bharat Electronics' (BEL) high order bookings

Bharat Electronics (BEL) features in the highest YoY net profit growth screener after its Q1 results - the company reported jump in operating income of Rs 1724.8 crore, up 97.9% YoY, beating estimates. Growth in total income was not as much, up 77.9% YoY due to  YoY drop in other income. BEL has nevertheless seen a strong jump in its EBITDA net profit, reversing from a loss in the same quarter last year to a profit of Rs. 163.3 crore.

The company saw strong order booking that helped offset higher employee costs, and saw new defense orders coming in around air control systems, weapon and radar systems, and artillery spending. The company saw order inflows for the June quarter of Rs. 2,423 crore, taking the order book backlong to over Rs. 41,000 crore, a record high. The company doesn't have to worry much about competition in its defence electronics space (which accounts for over 40% of the government's defence spending). BEL has built a moat against the competition with sophisticated technology, strong relationships with buyers, and heavy capital spending required to develop new products - BEL spends an estimated 9% of revenues on R&D towards new products. 

While some of the upcoming large projects have leaner margins, the order backlog bodes well for company revenue in the coming quarters. The company received hold and accumulate calls from ICICI Securities and Way2Wealth recently, at its current share price. Motilal Oswal and Prabhudas Lilladar on the other hand say BUY, expecting 20%+ upsides. 

Bharat Electronics Ltd. has lost -22.13% in the last 3 Months
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