Earnings Outlook
Bharat Electronics Jul-Sept PAT seen up 6% at INR 8.6 billion
This story was originally published at 16:57 IST on 14 October 2024
Register to read our real-time news.Informist, Monday, Oct. 14, 2024
By Narayana Krishna
HYDERABAD - A robust order book and execution are likely to help the public-sector Bharat Electronics Ltd. report healthy growth in its Jul-Sept earnings, analysts said. The Bengaluru-based defence electronics and information technology services company is expected to report 6% on-year growth in standalone net profit to INR 8.6 billion, according to an average of estimates from nine brokerages.
The company's revenue for the quarter is seen rising 19% on year to INR 47.6 billion, the estimates show. For the Jul-Sept quarter last year, Bharat Electronics reported a net profit of INR 8.1 billion on revenues of INR 39.9 billion.
Sequentially, net profit is seen up 11%, while revenue is expected to increase by 13%, according to the estimates. For Apr-Jun, Bharat Electronics reported a net profit of INR 7.8 billion on revenue of INR 41.9 billion.
Analysts' estimates for the Jul-Sept net profit of Bharat Electronics range from INR 6.7 billion, by brokerage Nirmal Bang Equities, to nearly INR 10 billion, by Nomura Equity Research. The estimates for revenue range from INR 42.6 billion, by Nuvama Wealth Management, to INR 52.6 billion, by Nirmal Bang.
Most analysts see Bharat Electronics as a beneficiary of the government’s push to indigenise defence production under its Atmanirbhar Bharat, or self-reliant India, programme. “The defence sector is currently enjoying a favourable environment, marked by the government’s focus on defence indigenisation under the 'Make in India' initiative," Antique Stock Broking said in its pre-earnings note. "This has led to healthy ordering activity, with multiple large-ticket orders being finalised during the year, helping companies to bolster their order books and setting the stage for FY25 (financial year 2024-25).”
Kotak Institutional Equities and Motilal Oswal expect the company's September quarter revenues to grow at a healthy pace, aided by order book execution, though both also expect the company to face some pressure on margins on account of last year's high base.
ORDER BOOK
Nuvama Wealth and Prabhudas Lilladher see bright long-term prospects for the company, backed by the government’s thrust on defence-sector localisation and export initiatives, alongside the plans of Bharat Electronics to diversify into non-defence verticals.
Kotak Institutional Equities said the company accumulated INR 71 billion worth of orders for Apr-Sept, and expects large order inflows for Oct-Mar. Motilal Oswal said the company’s order backlog stands at INR 767 billion, providing optimism for stronger revenue growth in the future.
MARGIN PRESSURE
Though analysts are positive on the company's revenue and profitability, they expect seasonal factors and raw material costs to affect its earnings before interest, tax, depreciation, and amortisation, or EBITDA, margins for Jul-Sept.
While Kotak Equities expects a 140-basis-point decline in the September quarter’s EBITDA margin to 24%, Motilal Oswal anticipates a 190 bps drop to 23.3%. Prabhudas Lilladher expects a margin of 23.4%, with a decline of 175 bps. However, Nomura projects margins at 24.4%, with an improvement of 79 bps. Bharat Electronics has set a target of achieving an EBITDA margin of 25% for the current financial year.
The average of estimates by eight brokerages for the Jul-Sept EBITDA of Bharat Electronics is INR 10.8 billion. The estimates range from INR 8.8 billion to INR 12.2 billion.
Nuvama Wealth said the company needs to demonstrate a robust execution rate of its existing large order book, coupled with a margin uptick, to justify its current valuation premium.
Bharat Electronics, which was included in the benchmark Nifty 50 index effective Sept. 30, is scheduled to announce its Jul-Sept earnings on Oct. 25. Market participants will be focused on the management’s commentary on order inflows following the government’s recent approval of the procurement of various defence products, the execution status of backlogs, progress in its non-defence business, and margin outlook.
Following are the Jul-Sept earnings estimates for Bharat Electronics, based on reports from nine brokerages:
|
Brokerage |
Net Sales |
Net Profit |
EBITDA |
|
-------(In INR million)------- |
|||
|
Antique Stock Broking Ltd. |
47,121.00 |
8,494.00 |
10,602.00 |
|
Elara Securities (India) Pvt. Ltd. |
47,954.00 |
8,741.00 |
10,820.00 |
|
Kotak Institutional Equities |
46,104.00 |
8,433.00 |
11,022.00 |
|
Motilal Oswal Financial Services Ltd. |
47,297.00 |
9,231.00 |
11,020.00 |
|
Nirmal Bang Equities Pvt. Ltd. |
52,573.00 |
6,684.00 |
8,871.00 |
|
Nomura Equity Research |
50,247.00 |
9,975.00 |
12,243.00 |
|
Nuvama Wealth Management Ltd. |
42,600.00 |
8,730.00 |
10,650.00 |
|
Prabhudas Lilladher Pvt. Ltd. |
47,023.00 |
8,808.00 |
11,003.00 |
|
Sharekhan Ltd. |
47,120.00 |
8,490.00 |
---- |
|
AVERAGE |
47,559.89 |
8,620.67 |
10,778.88 |
On Monday, shares of Bharat Electronics closed slightly lower at INR 285.70 on the National Stock Exchange. End
Edited by Rajeev Pai
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
To read more please subscribe
Share this Story:
