At the end of FY22, Bharat Electronics’ order book expanded to ₹57,000 crore, a rise of about 7% from a year ago

Bharat Electronics Ltd.'s stock touched a 52-week high of ₹248.20 on Monday, riding on last week’s momentum. On 7 April, the defence ministry announced the third positive indigenization list of 101 items, of which the company is a beneficiary. This includes weapons, complex systems, equipment, and other items which would be acquired from local manufacturers to reduce import dependency

The ministry’s first and second lists indigenized 101 and 108 items, respectively. “In the possible count of order inflows, Bharat Electronics leads in this (third) list as well with 24 probable order accruals," analysts at ICICI Securities said in a report on 8 April.

“Higher capital budget and higher thrust towards indigenization will allow for better order book and execution visibility over an extended timeframe, and better working capital dynamics. Both are recipes for return ratio improvement and multiple expansion," the brokerage firm said.

At the end of FY22, Bharat Electronics’ order book rose to ₹57,000 crore, representing an increase of about 7% from a year earlier. The major orders obtained include avionics pack for light combat aircraft, advanced electronic warfare suite for fighter aircraft and instrumented electronic warfare range.

Even so, based on provisional numbers, revenues have disappointed a bit with FY22 growth of 8.5% year-on-year, falling short of the company’s guidance of 10-12% growth because of supply-chain constraints. Bharat Electronics’ revenue of ₹15,000 crore was 4% below JM Financial Institutional Securities’ estimates.

Sales growth is set to rise given the robust order book, government focus on local manufacturing, and opportunities in non-defence areas such as lithium-ion batteries and cells with a shift in the automobile industry to sustainable options.

Investors cheered the growth outlook, with the company’s shares rising 16% year to date.

“The environment that necessitates India to be prepared amid the geopolitical tensions is one factor for the recent rally in Bharat Electronics. The company has been at the top of the defence manufacturing chain. Further, with all possible variables such as profitability, exports, etc. in great shape, there is scope for upside to earnings growth over medium to long term," said Amit Mahawar, an analyst at Edelweiss Securities Ltd. Bloomberg data shows the stock is trading at almost 20 times estimated earnings for FY24. All eyes now will be on execution.