Shares of leading defense electronics company Bharat Electronics Ltd (BEL) surged over 2% to hit a new 52-week high of Rs 175 on the NSE, taking its market capitalization to Rs 1.27 lakh crore.
The sharp rally comes on the back of BEL securing an order of Rs 1,701 crore from Goa Shipyard Limited.
This order win highlights BEL’s strong position in the defense electronics space and its ability to cater to the requirements of the Indian armed forces.
The company is a major beneficiary of the increasing focus on indigenization in defense procurements by the Modi government.
Over the past decade, the company has delivered stellar 1100% returns to investors on the back of rising orders.
Since February 2019, the stock has surged over 600% from Rs 25 to the current level of Rs 175, generating huge wealth for long-term investors.
The rally may continue given BEL’s dominant position in radars, missile systems, electronic warfare systems and the government’s target of achieving 50% self-reliance in defense production in the coming years.
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Key Details of the Order:
The Rs 1,701 crore order is for supplying 14 different types of sensors to Goa Shipyard Limited. These sensors will be used in the Next Generation Offshore Patrol Vessels being built by the shipyard.
BEL will fulfill this order through its pan-India network of manufacturing facilities as well as MSME vendors and partners.
This aligns with the central government’s Aatmanirbhar Bharat initiative.
Additionally, BEL has also received a Rs 972 crore order from Garden Reach Shipbuilders and Engineers Limited.
This is for supplying various communication equipment and sensors for naval ships.
Impact on BEL:
In FY23 so far, BEL has already received orders worth Rs 25,935 crore, including this latest order.
With a strong order pipeline and order book exceeding Rs 71,000 crore, BEL is well positioned to continue its growth momentum.
Its healthy order intake reflects the company’s execution capabilities.
Market Response:
- Bullish Rise: The recent order flurry has fueled investor optimism, sending BEL shares surging by 2.29% to Rs 175, just a touch shy of the 52-week high of Rs 176.
- Multibagger Returns: Over the past decade, BEL has rewarded investors handsomely, delivering a staggering 1100% return. Since May 2020’s pandemic lows, the stock has appreciated by 85%, and year-to-date, investors have enjoyed a 90% gain.
Fundamentals Remain Strong:
- Robust Financials: BEL boasts solid financial performance, with consistent revenue and net profit growth over the past five years. FY23 saw a 21% rise in net profit to Rs 3,324 crore, and the company maintains a healthy return on equity (ROE) of 23%.
- Low Debt: The company’s debt-to-equity ratio is negligible, indicating a strong financial position and ample room for future investments.
Future Outlook:
- Government Push: With the Indian government’s focus on indigenization and increased defense spending, BEL is poised to benefit from a favorable tailwind.
- Diversification Play: Apart from its core defense business, BEL is venturing into areas like cybersecurity and electronic warfare, providing further growth avenues.
The company is expected to end FY23 with total orders of around Rs 30,000 crore. Its dominant position in the defense electronics space, along with the government’s focus on indigenous manufacturing is positive.
Over the long term, BEL’s diversified product profile, strong R&D capabilities, and growing order book reaffirm its growth potential. The company offers a good investment opportunity for long-term investors, but again, do your own research or consult an experienced SEBI registered advisor for making informed decisions.
Disclaimer: This analysis is for informational purposes only and should not be taken as investment advice. Investors are advised to conduct their own due diligence before making any investment decisions.
