Bharat Electronics Company analysis

Industry profile  :  The Defence industry of India is a strategically important sector in India. With strength of over 1.3 million active personnel, it is world’s 3rd largest military force and has the world’s largest volunteer army. The total budget sanctioned for the Indian military for the financial year 2015 is 2.47 trillion Indian rupees ($40.07 billion). Govt of india is one of large investor with some private companies like L&T, Reliance Naval, Ashok Leyland Tata group companyes like Part of tata Power, Nelco (TATA DEFENCE) Tata motors Defence wing, Astra Micro also present. But govt companies like DRDO with US$1.6 billion budget, Bharat Electronics US$1.1 billion revenue, Hindustan Aeronautics ( IPO Expected soon with more than US$2.8 billion revenue). Before 2011, the sector is all in hand of Govt of India. Today FDI is permitted in the sector 49%. The NDA government in its first year cleared 39 capital procurement proposals, of which 32 proposals worth ₹889 billion (US$14 billion) (or 96% of value of total proposals) were categorized as Buy (Indian) and Buy and Make (Indian)—the top two prioritized domestic industry-centric procurement categories as per the Defence Procurement Procedure.  In July 2015, the defence ministry eased export regulations and stopped demanding multiple assurances on end-use from foreign governments even for sale of components by Indian entities.

Company profile  :  Bharat Electronics Limited (BEL) was set up at Bangalore by the Government of India under the Ministry of Defence in 1954 to meet the specialised electronic needs of the Indian defence services. Over the years, it has grown into a multi–product, multi–technology, multi–unit company.

The company having diverse product range. under defence for communication, radars, naval systems, opto electronics, Electronic Warfare systems, weapon system, tank electronics and simulators. It also offers products in area of switching equipment, TV and broadcast, DTH, telecom, simputer, electronic voting machines and electronic components

The company holding customers not only from defence sector but also  Para military forces, Radars & Sonars Indian Defence Services, Civil Aviation, Meteorological Department, Space Department, Telecommunication Department, Power Sector, Oil Industry, Railways, All India Radio, Doordarshan, Police, State Governments, Public Sector Undertakings and many more.

BEL exports its products to countries like Indonesia, Egypt, Switzerland, Botswana, Surinam, Malaysia, Russia, Brazil, Sri Lanka, Nepal, Israel, South Africa, UAE, Uganda, Turkey, UK, Azerbaijan, Germany, Zimbabwe, Kenya, Nigeria, Canada, Belgium, Italy, France, Malawi and Mauritius.

Shareholding Pattern  :  Govt of India Holds 67.94%. Mutual funds are in love with this stock. They hold this stock more than Foreign investors. 11.41% by mutual funds vs. 8.11% foreign investors. Insurance companies hold 4.58%. 0.13% held by financial Institutions. Remaining is held by public.

Financial and Ratios : 

 2010 - 112011 - 122012 - 132013 - 142014 - 152015 - 162016 - 17
Revenue5,861.076,353.136,713.806,704.007,320.617,827.309,082.89
Net profit861.47829.90889.83931.621,167.241,357.671,547.62
NPM14.69%13.06%13.25%13.89%15.94%17.34%17.03%
EPS107.68103.74111.23116.45145.9156.576.64
Book Value623.21702.78787.96877.15985.63363.9133.62
Dividend per share21.6020.8022.3023.3029.20172.25
Dividend Payout20.0520.0520.0420.0020.0130.0539.80
ROE17.2714.7614.1113.2714.8015.5420.61
ROCE16.3613.9613.3212.6014.0114.6618.33
ROA6.54 5.586.156.417.677.539.02
Asset Turnover42.4338.8142.2543.1945.0140.4750.19

Future prospects  :  Defence is one important sector for govt expenditure and govt is planing to make it big. Make in India is best for company like Bharat Electronics. Fundamentally the company is strong but in 2017 the stock does not perform. Election in 2018 and 2019 are also one big boost as the company is leader in EVM manufacturing. Expecting it to be one of the best performer.

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About Ashutosh Tilak

Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me analystashu@gmail.com or @androidashu & @InsideFinanc on twitter