Should You Buy Bharat Electronics for a 30% Upside?

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Should You Buy Bharat Electronics for a 30% Upside?
Credit: © Reuters.

By Aditya Raghunath -- Bharat Electronics Ltd (NS: BAJE )  is a state-owned defense and aerospace company with nine factories in the country. It is a primary distributor of advanced electronic equipment to India’s armed forces.

ICICI Direct is optimistic about the company’s future order book and pipeline. The company has started diversifying into the non-defense space with a view to de-risk its business which primarily depends on defense contracts. This is a good move by BEL as the Indian government announced an allocation of Rs 3.37 lakh crore for the defense budget for FY2020-21. This is only a 5.8% increase over the allocation for the current fiscal year. The brokerage firm is also confident in BEL’s plans to ramp up execution to meet its order book. It has given BEL a target of Rs 170, an upside of almost 30% from its current level of Rs 132.

While India’s defense budget is up only marginally, Sharekhan is confident that BEL’s defense book will grow larger. The company got bagged a contract to supply light amplification by stimulated emission of radiation dazzlers (laser dazzlers) for the Indian Navy, according to The Ministry of Defence has also signed a contract with BEL to procure 10 Lynx U2 Fire Control systems for the Indian Navy’s frontline warships. Sharekhan has given BEL a target of Rs 152, up 15% from current levels.

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