BEL gains as UBS raises target price on improved earning visibility

UBS expects BEL to be the prime beneficiary of imports reduction and exports ramp-up in the defence space but added that recent management commentary highlighted near-term revenue disruption

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Shares of BEL gained nearly a percent at the open on December 15, a day after the brokerage firm UBS raised the target price to Rs 205.

At 9.20 am, the stock was trading at Rs 167.80.

In line with their preference for state-owned defence enterprises, they remain bullish on Bharat Electronics’ (BEL) growth/returns, analysts at UBS said.

Improving earnings growth visibility and an expanding order pipeline justified the premium valuation. The analysts raised the target price to Rs 205, recognising potential upgrades to new orders over the next three to five years, and exports.

Apart from BEL, the analysts also said that they preferred stocks like L&T and ABB in the segment.

Also read: Will Bharat Electronics’ annual orders surpass previous record?

At the end of the September quarter, BEL order book stood at Rs 6,900 crore. According to the brokerage, the company has an identified long-term pipeline in excess of Rs 2 trillion, which saw upward revision as more projects got added.

“A prime beneficiary of an expanding defence manufacturing ecosystem, coupled with BEL’s consistent and significant investments in R&D and capex should bolster its competitive edge, allowing exports potential as a tier-1 company,” the brokerage said.

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Among state owned defence players, UBS expects BEL to be a prime beneficiary of imports reduction/exports ramp-up but added that recent management commentary highlighted some near-term revenue disruption that could lead to revenue growth at the lower end of the topline guidance of 15 percent for FY24.

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