Bharat Electronics Q2 preview: Strong revenue growth likely, order pipeline to be key monitorable

Bharat Electronics (BEL), which was recently added in the Nifty50 pack, is set to announce its results for the September 2024 quarter (Q2FY25) later today. The brokerage firms have a mixed opinion on the defence space PSU player in terms of Ebita and net profit.

Analysts tracking the stock believe that the BEL is set to report a 20-30 per cent year-on-year (YoY) rise in its revenue on the back of a healthy order book. However, some analysts believe its Ebitda to contract on a quarter-on-quarter (QoQ) basis, despite an improvement in margins of about 300 basis points (bps) sequentially.

Brokerages believe that leading defence companies including Bharat Electronics reported robust order inflows. The total order inflows markedly increased, reflecting sustained demand for indigenous equipment, said the analysts tracking the stock. Indian defence manufacturers have been ramping up their focus on export markets, they said.

Nirmal Bang Institutional Equities said that Bharat Electronics is likely to report a revenue of Rs 5,258.3 crore, up 31.1 per cent YoY and 23.9 per cent QoQ. Ebitda is seen at Rs 887.1 crore, falling 12.5 per cent YoY and 6.4 per cent QoQ, with Ebitda margins likely to expand 300 bps to 25.3 per cent for the quarter. Net profit is seen at Rs 668.4 crore, down 15 per cent YoY and QoQ.

"BEL delivered 100 Control Centres for the Akashteer Air Defence System ahead of schedule, under an order worth Rs 1,900 crore in Q2FY25. It also entered the space domain through a collaboration with Canada’s Reliasat Inc. to develop space products. It secured an Rs 850 crore order from Cochin Shipyard for indigenous X Band Multi-Function Radar, boosting its presence," it said.

JM Financial pencils BEL's revenue at Rs 4,800 crore, up 20.2 per cent YoY and 14.3 per cent QoQ for the September 2024 quarter. Ebitda for the quarter may come in at Rs 1,180.7 crore, rising 17.6 per cent YoY, but Ebitda margins may contract 60 bps to 24.6 per cent. Its net profit may come in at Rs 957 crore, rising nearly 18 per cent YoY.

"Strong opening order book of Rs 76,700 crore to drive revenue growth of 20 per cent YoY. year-to-date order inflow stood at Rs 7,700 crores. Order pipeline will be key moniterables. Ebitda margin is expected to be healthy due to operating leverage," JM added, picking BEL as the top pick from the space.

Shares of Bharat Electronics (BEL) settled at Rs 271.40, rising more than one per cent for the day. The total market capitalization of the company stood marginally below Rs 2 lakh crore. However, the stock has corrected more than 20 per cent from its 52-week high at Rs 340.35 hit in July 2024.

InCred Equities expects BEL may clock a revenue of Rs 4,577.2 crore, rising 16 per cent YoY and 30 per cent QoQ. Ebitda is seen at Rs 984.1 crore, up 15 per cent YoY and 48 per cent QoQ. Net profit may come in at Rs 716.7 crore up 17 per cent YoY and 35 per cent QoQ. "Our outlook on the sector remains positive, and maintains an 'overweight' rating on it," picking BEL as its preferred pick.

"After a strong order inflow in Q1FY24, the new order win momentum continued in Q2FY24. We expect sales growth driven by increased execution of significant orders and alleviation of supply chain challenges. The Ebitda  margin is expected to remain consistent. Management commentary on order pipeline and working capital needs are key monitorable," InCred added.