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Strong performance to continue…

About the stock: Bharat Electronics (BEL) is a leading aerospace and defence electronics company. It primarily manufactures advance electronics products.

* Multi-product, multi-technology - diverse product range includes radar, missile systems, electronic warfare & avionics, anti-submarine warfare, electro-optics, home land security, civilian products, etc. Focus is to increase the non-defence share to ~20-25% over two to three years.

Key Highlights of Virtual Analyst Meet:

* Non-defence revenue contribution is expected to increase from ~10% to 20- 25% over the next two to three years.

* Planned capex of ~| 1800 crore over the next three years.

* Focus on retaining only R&D and IT part and outsourcing other requirement to reduce manpower cost from ~14% to 12-13% over two to three years.

What should investors do?

Overall, expected double digit revenue, order inflow growth, sustained margins and strong order book to ensure a better performance.

* We remain long term positive and retain our BUY rating on the stock

Target Price and Valuation: We value BEL at | 250 i.e. 22x P/E on FY23E EPS.

Key triggers for future price performance:

* Strategy to diversify into non-defence areas, focus on increasing exports and services share would aid long term growth and help de-risk its business

* Strong order inflow guidance of | 15000-17000 crore for FY22E

* We expect revenue, EBITDA to grow at CAGR of ~14.6%, 11.9%, respectively, in FY21-23E aided by sustained margins in range of 21-22%

* Strong balance sheet, double digit returns ratios

Alternate Stock Idea: We also like Siemens Ltd in our coverage.

* Further penetration of value added automation and digitisation products & services across segments to drive margins, long term growth

* BUY with a target price of | 2550

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