MOSL: BHARAT ELECTRONICS (Buy)-Beat on all fronts-Revenue visibility healthy with reasonable valuations
Bharat Electronics: Beat on all fronts; Revenue visibility healthy with reasonable valuations
(BHE IN, Mkt Cap USD3.9b, CMP INR112, TP INR130, 16% Upside, Buy)
- Operational results above estimates: 4QFY19 revenue increased 7.7% YoY to INR38.8b (v/s our est. of INR38.9b), primarily driven by execution of EVM/VVPAT orders, IACCS, weapon locating radars and land-based EW system. EBITDA grew 17% YoY to INR9.3b (our est. of INR7.6b), while reported net profit increased 20% YoY to INR6.7b. Other income jumped to INR1.3b v/s INR279m in 4QFY18, supported by one time dividend from an associate company of INR910m and income tax refund of INR170m (excluding this, other income would stand at INR210m). For FY19, sales/EBIDTA/PAT grew 17%/43%/38% on YoY basis.
- Margin improvement on better revenue mix; expect moderation in FY20: Gross margin during the quarter improved 490bp YoY to 49.4%, supported by execution of indigenous products where raw material content is at the lower end. EBIDTA margin too improved by 180bp to 23.9%. Better revenue mix and higher indigenization levels led to margin improvement during FY19 (+430bp YoY; 23.7%), but, on a sustainable basis and the current order book quality, BHE expects EBIDTA margins to moderate to 20-21%.
Bharat Electronics Limited is engaged in design, manufacture and supply of electronics products/systems for the defense requirements, as well as for nondefense markets. The Company's principal products/services include weapon systems, radar and fire control systems, and communication. Its defense products include defense communication; radars; naval systems; command, control, communications, computers, and intelligence systems; weapon systems; telecom and broadcast systems; electronic warfare; electro optics, and solar photovoltaic systems. Its nondefense products include turnkey system solutions; civilian radars; e-governance systems, and homeland security. Its other range of products include electronic voting machines, communication equipment, radar warning receiver and casings. It offers electronic manufacturing services in areas of printed circuit board assembly and testing; precision machining and fabrication; opto electronics components and assemblies, and offsets, among others.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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