Here is why BEL should be on your watchlist!

The shares of Bharat Electronics Limited have been outperforming markets in the past few trading sessions. In one month, the shares of BEL have climbed by more than 6%.

BEL has declared a healthy set of numbers this quarter.

Following are the highlights:

1. EBITDA margins for H1FY23 came in at 19.4% vs 17.4% in H1FY22, owing to better absorption of fixed overheads.

2. Order book-to-sales ratio stands healthy at 3.1x TTM revenue, thereby providing revenue visibility for a couple of years.

In-line results with estimates and visibility in earnings are what the bulls are focusing on. BEL reported revenue of Rs 39.5 bn (up 7.8% YoY) and PAT came in at Rs 6.1 bn (flat YoY) in Q2FY23. H1FY23 EBITDA margin improved 204 bps YoY to 19.4%, owing to better absorption of fixed overheads. Order inflows came in at Rs 13.6 bn (down 49.3% YoY) in Q2FY23, while order book stood at Rs 528 bn (3.1x TTM revenue), providing revenue visibility for the next couple of years. Order pipeline stands strong from Akash weapon system, QRSAM, LRSAM and Naval equipment like surveillance systems, radars, navigation systems etc.

The company has been focusing on diversification in non-defence verticals such as EV, metros, electronic warfare, healthcare, homeland security etc. Moreover, BEL recently signed an MoU with Triton Electric Vehicle Pvt. Ltd (TEV) for manufacturing Hydrogen Fuel cells, with technology transfer from TEV. BEL also bagged an order worth Rs 80.6 bn from Triton Electric Vehicle India Pvt Ltd (in Q3FY23), for supplying Li-Ion Battery Packs. Earlier management guided revenue growth of 15%, with an EBITDA margin in the range of 20-22% and order inflows of ~Rs200bn for FY23.

The shares of BEL will remain in focus, 1) its strong order backlog & order pipeline 2) the recent MoU in the hydrogen fuel cell, 4) diversification in newer business verticals like medical equipment, hydrogen fuel cell, EV batteries etc 5) focus on export markets and 6) government focus on product indigenization etc.

Markets are expected to open the gap up on Monday and BEL will be in focus.