Buy Bharat Electronics Ltd For Target Rs. 360 by Motilal Oswal Financial Services Ltd
* We expect revenue growth of 20% YoY, led by healthy execution of the record OB of INR746b. ? Gross margin is expected to normalize post the 2Q spike.
* Key monitorables include update on order inflows, status of QRSAM/MRSAM, execution of orders for LRSAM and EW projects, share of exports, and working capital cycle.
* We expect margins to return to FY24 levels and contract ~40bp YoY, reaching 25%. Margins in BHE are a function of the project mix and can vary sharply during a quarter.
* Further indigenization of modules, subsystems, etc are expected to support BEL in future margin expansion.
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