Bharat Electronics Ltd’s strong order book overshadowed the execution obstacles the company faced in Q3 (Q4 FY22) due to the Russo-Ukrainian war and chip shortages.
Analysts at JM Financial Institution Securities Company recently met Bharat Electronics senior management, where he stated that semiconductor shortages have limited the company’s ability to post additional revenue. 2,700 crore in FY22. As the situation eases, the company expects to book this in FY23. Even so, the company targets revenue growth of just 15% for FY21. key 23. Revenue grew at a lower than expected rate of 9% year-on-year in FY22 to almost 15,314 crore.
Most of the 23rd year revenue is expected to come from 57,570 crore at the end of fiscal year 22. This indicates a limited reliance on new orders in fiscal year 23. In any event, the company expects strong order cash flows 20,000- 22,000 crore in fiscal year 23.
The government’s move to actively promote items such as weapons and systems, as well as it, will boost order capital flows. Additionally, such measures would lead to a reduction in raw material costs by 200-300 basis points (bps), according to the company. One basis point is 0.01%. It now projects Ebitda margins (earnings before interest, taxes, depreciation and amortization) for fiscal year 23 to be in the 21-23% range from its previous guidance of 20- 22%. In fiscal year 22, the index was 21.6%. “We forecast sales and earnings per share CAGR (compound annual growth rate) of 16%/19% for the period 22 to 24E led by a robust ordering system , scale in new businesses and increase centralization,” JM Financial analysts said in a report on June 14.
However, the impact on gross margins needs to be seen as the non-defense mix grows. Furthermore, much of the company’s order cash flow depends on funds allocated to the Department of Defense, and this can be a concern. “Recent excise tax cuts, increased subsidies in the agricultural sector and higher oil prices have hit the government finances,” said one analyst, who asked not to be named.
Meanwhile, Bloomberg data shows the stock is trading at nearly 19 times estimated earnings for fiscal year 24. The company’s strong order book provides good revenue visibility. Investors took note. The company’s stock is down 7.5% from its 52-week high on April 19, but the stock is up about 14% so far in calendar year 2022 compared with the index’s nearly 11% drop. Nifty500. The execution of commands will remain a key monitorable.
