Buy Bharat Electronics - Call closed - 108% returns as on 11-12-09

CALL CLOSED (LONG TERM INVESTORS - HOLD IT) Buy Bharat Electronics on dips. Current market price: 927. Long term target: 1854. Book value: 404, P/E ratio: 9.87.

Armed for growth:

Just when large manufacturers are curtailing their activities to save on costs, Bharat Electronics is opening a support centre at Kochi, Kerala, to serve its growing clientele. A Navratna public sector undertaking which gets 80-85 per cent of sales from the armed forces, BEL’s turnover and profit after tax have been rising consistently for four decades now. It is talking to global players like Lockheed Martin, Boeing and EADS to make the most of the government’s “offset” clause, which requires any foreign company bagging an order worth over Rs 300 crore from India’s defence sector to share 30 per cent of it with Indian firms.

It also gains from its links with the Defence Research & Development Organisation. Says V.V.R. Sastry, BEL’s Chairman & Managing Director: “We are interacting with DRDO for developing new products.” Over the last one year, the BEL scrip has slid some 59 per cent, but broking houses still bet big on it. In the last five years, while the defence budget has grown at 12 per cent, defence capital expenditure grew at 23 per cent. BEL is a big beneficiary of this increase. The company has strong cash flows and no debts at all.

Press release as on 2nd April 2009:
Navratna defence PSU Bharat Electronics Limited (BEL) has recorded a turnover of Rs.4618 crores (provisional) for the year 2008-09 as against last year’s turnover of Rs.4102.54 crores.

The estimated Profit Before Tax is Rs.1095 crores as against last year’s figure of Rs.1171.3 crores. BEL achieved exports of US $ 17.75 million, which is an increase of 15 per cent over last year’s figure of US $ 15.43 million. The turnover per employee during 2008-09 has increased to Rs.38.6 lakhs from last year’s Rs.33.16 lakhs. The value added per employee has also shown a considerable growth to Rs.18 lakhs from last year’s Rs.16 lakhs.

The order book as on April 1, 2009, is estimated to be around Rs.10,000 crores. Some of the significant orders executed during the year include supply of High Power HF Communication Sets, Frequency Hopping VHF Transreceivers, UHF Radio Relays, Artillery Combat Command Control Systems, Upgraded Fire Control Systems, Fourth Generation Composite Communication Systems for various ships and yards, Radar Warning Receivers, Surveillance Radar Elements, Thermal Imager based Integrated Observation Equipment, 3D Surveillance Radar Rohini, Shipborne & Airborne Electronic Warfare Systems, Laser Range Finders, Night Vision Binoculars, Satellite based Road & Rail Mobile Communication System and Upgraded EVMs.

More than 20 new products were introduced and supplied during the year. The new products include Upgraded Fire Control Systems, Light weight Helicopter borne ESM Systems, Light weight Vehicle based Direction Finding Systems, Shipborne Radar band ESM System, Radar Finger Printing System, Wide Area Network for BSF, Upgraded EVMs, Thermal Imager Sight for existing radars and Synchronous Transfer Mode Encryptors.