Bharat Electronics BEL – Q4 Results Update

Bharat Electronics BEL – Q4 Results Update.
During the quarter, BEL has been able to maintain its margins at elevated levels of 30%. On a sequential basis (not strictly comparable due to skewed revenue booking), margins have expanded by 500 bps. Employee cost is higher on account of wage revision.

While the order backlog is strong, bureaucracy in defence matters poses the risk of execution taking longer period.The order book as on April 01, 2009 is estimated to be around Rs 100 bn, which is up 5.8%. Order backlog provides a revenue visibility of 26 months. However, for the year we estimate order inflows to have grown by 10% in FY09.

Strategic tie-ups with global defence majors.

BEL is looking for new growth opportunities through organic or inorganic growth. In this direction, BEL is discussing with reputed foreign and Indian players for forming joint venture companies in India, in the areas of defence electronics, namely electro optics, airborne electronic warfare, missile electronics and guidance systems, microwave super components, etc. The company has also appointed KPMG to identify future growth opportunities for the company.

India is one of the largest defence equipment importers in the world. This is attracting several global defence majors to India. The U.S. defence manufacturer Northrop Grumman has recently entered into an agreement with Bharat Electronics Limited to manufacture components of the F-16 fire control radar.

Pact with Boeing to establish a facility in India to test military products:
Boeing co of US has recently announced that it has signed an pact with BEL to set up a facility for analysis and experimentation of military products and equipments. Boeing has similar centers in Australia and the U.K., the statement said.

Valuations.

At the current price, BEL is trading at 8.1x FY10E earnings. The stock tends to outperform during times of economic uncertainties. The stock has gone up more than 100% since last mentioned in StockWatch section and it is quoting at Rs.1000. So investors could wait for better entry points.

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