Why are markets so excited about the BEL stock?

The stock of Bharat Airtel was around Rs120 at the start of the year and since then it has rallied sharply to get close to Rs300 per share. The stock was always the low hanging fruit, but most people gave it a miss. Things have changed drastically in the last few months. Two things are working for BEL. The first is the solid performance put up by the company in the first quarter Q1FY23. The second reason is the robust order book position of the company and the surge in defence orders flowing in from the Indian government. 

Let us talk about the profit performance for the June Q1FY23 quarter first. For the first quarter, Bharat Electronics (BEL) reported 15-fold spurt in its net profits at Rs366.33 crore. At the same time, the top line revenues of BEL almost doubled to Rs3,140 crore. The stock has been rallying sharply over the last 3 months and the strong quarterly results announced by the company only added to the charm. Its guidance for the coming quarters was also very robust amidst its frenetic pace of growth. Gross margins have been recovering continuously.

During Q1FY23, the order inflows were muted, but with the major allocation to in-sourcing, BEL is likely to get its confirmed set of defence orders from the government of India. Bharat Electronics is slated to garner defence orders to the tune of Rs110,000 crore over the next five years. The revenue thrust to BEL is not only coming from the domestic markets but also from the international markets. It saw a sharp spurt in the total export orders which has nearly doubled in the fiscal year 2022.

Some of the big export orders are coming to BEL from fairly marquee names. In India, BEL is a preferred supplier to the armed forces, the scientific and defence research organizations and other institutions of learning and large corporates. In fact, Airbus, which is a European consortium and a competitor to Boeing. BEL will follow through its C295 transport aircraft orders from IAF (to Tata Airbus consortium). BEL could also get significant orders from Hindustan Aeronautics Ltd even as HAL emerges as the top contender for global air force tenders,"