BEL Stock gained momentum and is building in the stock BEL after it announced Q2 results, which surpassed market analysts’ expectations on various dimensions. Analysts remain upbeat on the long-term prospect as the behemoth in defence and aerospace has delivered a promising Q2 report for FY25.
Strong Q2 Results Creates Upside Projections
BEL reports a good Q2 FY25 with good operations coming through well and its strength reflected there. While revenue has slipped just short of the street estimate, higher than the estimates margins have compensated pretty well, which analysts point to as robust cost management practices by BEL. Standalone net profit surged 34% YoY to ₹1,091.27 crore. Order book growth in tandem with steady execution is helping the top line expand. Revenue from operations increased 14.8% YoY to ₹4,583.41 crore.
Morgan Stanley has assigned an overweight rating to BEL at a target price of ₹364 per share. The company believes that BEL is expected to deliver 15% revenue growth for FY25 and is likely to receive orders worth ₹25,000 crore with a strong gross margin of 42%.
Strong Order Book and Growth Prospects
The strong order inflows at ₹7,400 crore in the first half of FY25 further support the growth story of BEL. Analysts at Motilal Oswal expect a pick-up in defence orders over the next few quarters and place BEL as one of the biggest beneficiaries. With critical defence projects in areas such as naval systems, electronic warfare (EW), artillery, platform orders, and exports, the company’s outlook for the future is good. Motilal Oswal has projected the company to report a compounded annual growth rate of 19% on sales and EBITDA and profit after tax at 22% for FY24-FY27.
In addition, the brokerage firm expects strong operating cash flow and free cash flow of BEL to remain healthy over FY25-27, which shall be supported by disciplined working capital management. BEL currently maintains a cash surplus of ₹11,000 crores as of FY24, allowing further flexibility in capacity expansion when the order pipeline grows.
Analyst Projections and Valuation
Motilal Oswal has a buy rating on the stock and keeps a target of ₹360. It had valued its offering at 35 times BEL’s estimated earnings for FY26. Now, the stock is priced at 33.1 times and 27.4 times its estimated EPS for FY26 and FY27, respectively. Defence is an area that enjoys robust tailwinds that underpin such an optimistic valuation coupled with BEL’s growth sustain and prudent financial strategy.
Analysts also warn that any order inflow slowdown—be it from the defence or non-defence segments, combined with higher competition, delay in large tender finalizations, commodity price increases, or delayed payments from the MoD—can adversely affect BEL’s revenues, margins, and cash flows.
1. Recent Market Movement and Performance
Despite the bullish perspective, BEL shares closed narrowly weaker in the previous trading day, falling around 0.9% at ₹269.85 on NSE. However, it has outperformed the wider market consistently as BEL’s stock has gained close to 46% year to date in 2023. Its shares have jumped nearly 104% in the past 12 months alone compared with a gain of nearly 28% by Nifty.
2. Future Outlook and Growth Factors
BEL’s prospects are undergirded by its strategic positioning in the defence and aerospace sectors. Growth drivers would be a strong order pipeline and increasing market opportunities in markets like high-value segments of naval systems, electronic warfare, and international defence collaborations. Investment in advanced technologies and expertise in providing end-to-end defence solutions positions the company favourably as India continues to push Indigenous defence manufacturing.
BEL has had consistent performances and increased defence market penetration, in keeping with India’s vision of an ‘Atmanirbhar Bharat‘, where it is pushing towards self-reliance in defence manufacturing. The future bodes well for BEL, considering India is investing heavily to further enhance its defence capabilities. Significant government contracts and increasing clientele will contribute substantially to this growth.
Conclusion
With a healthy Q2 performance and mega bull calls coming in from the key broking houses, BEL remains a favourite on the investment-worthy list for long-term growth in the defence and aerospace sectors. This is reflected in a nearly 40% upsurge of the stock from a year ago which reflects investors’ confidence in the capacity of BEL to transform operational strengths into growth capitalizing on the fast-moving Indian defence landscape. While short-term headwinds would come from order inflows and competition, BEL is positioned for sustainable growth through its disciplined financial management, healthy cash reserves, and robust order book.
For investors who seek a company with sound fundamentals and growth prospects within India’s high-priority defence sector, BEL may well be an attractive addition to the portfolio.
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