Bharat Electronics Ltd
About company
1. One of the key beneficiaries of India’s focus on strengthening its defence
capabilities will be Bharat Electronics, which was formed with the aim of serving
different mechanical and electrical requirements of the Indian defence sector. As
the defence sector is considered to be strategic, it is not surprising that
government of India holds 75.86 per cent stake in the company. This has also
resulted in most of the defence requirements being met through Bharat
Electronics (BEL).
2. The company supplies strategic electronics such as range of military
communication systems, radars, naval systems, telecom & broadcast systems,
electronic warfare systems, tank electronics and many more to all the defence
establishments including Army, Navy, Air Force and Paramilitary Forces. As a
result of this, 83 per cent of the companys revenue accrue from the defence
sector, while 17 per cent is accounted by civil equipment like telecommunication,
broadcasting products like DTH and electronic voting machines (EVM).
Its Future growth
1. The company is consolidating its businesses so as to achieve its targeted revenue of Rs 10,000 crore by FY12 (from Rs 4,100
crore in FY08) implying an growth rate of 26 per cent per annum.
2. To achieve this, the company has planned a total capital expenditure of Rs 570 crore for the next two years (FY09 and FY10).
This will be towards modernizing its manufacturing facilities.
3. Also, the focus will be strategic tie-ups with its partners to enhance business capabilities. The company already has
partnerships with aerospace majors like Lockheed Martin and Boeing and global defence companies like EADS, Northrop
Grumman, Raytheon and Honeywell.
4. BEL is looking for new growth opportunities through organic or inorganic growth in existing and new areas. In this direction, BEL
is discussing with reputed foreign and Indian players for forming joint venture companies in India, in the areas of defence
electronics, namely electro optics, airborne electronic warfare, missile electronics and guidance systems, microwave super
components, etc.
5. The company has also been aggressively investing in developing new products in-house-in FY08, it introduced about 20 new
products.
6. The company now intends to increase its R&D expenditure, which was about 5 per cent in FY08, to 810 per cent of its turnover,
which should help sustain its efforts in this direction.
Over all summary of the company
1. The company’s strategy to increase spend on R&D and new capacities, acquire new technologies and identify key growth
areas augurs well and should help in achieving its ambitious long-term growth plans. BEL is a debt-free company and is sitting
on a cash and cash equivalent worth Rs 2,400 crore, which also indicates that the company has enough muscle to fund its
future plans.
2. Since the company has maintained a dividend payout in excess of 20 per cent, one can expect additional returns in terms of
healthy dividends in future as well.
Defensive Stock Picks
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Your Way To Earn
Welcome to the Indian Stock Market
Defensive Stock Picks
These are called safe stock pick because downside is limited to these stocks taking into consideration its growth and past records. But as entire market are still bearish due to slowdown in economy all over the world including India.
So buying few stocks at a time is advisable instead of buying in bulk in single trade.
(Updated - Mar 2009)
Important - Its consistent growth
Historically, the growth in the defence expenditure has been in the range of 6-8 per cent, which is expected to continue on the back of similar growth in the GDP. Though the growth may not look very strong, but given the consistency in the defence spending, the company has been able grow on sustainable basis. BELs revenue and net profit have never declined in any of the last ten years. Its revenue and net profit have consistently grown annually at 14.6 per cent and 35 per cent, respectively during FY1999-FY2008 respectively.
Its order book
1. Moreover, the company’s current order book of Rs 10,000 crore is 2.5 times BEL’s FY08 revenue and provides good
revenue visibility.
2. The company was recently awarded an Rs 100 crore order for EVM by the election commission.
Expected Returns
Taking into consideration, company’s consistent growth in last 10 years and current uncertain market situation, this stock provides best investment opportunity for long term.
CMP - Rs 841
Buy if Possible - It has support at Rs 800, Rs 650 and Rs 500. After breaking these
levels further downside is expected, as markets are bearish so try to pick at low as
possible - (It went down till Rs 803)
Expected Returns - 40% to 50%
Period - 2 to 3 years
Taking into consideration Rs.92 as buying price following are the returns
42% Target acheived in month of May 2009. It went high till Rs 1395 on 25 May 2009 (Updated - May 2009)
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