Bharat Electronics Ltd (BEL) is India’s largest Defence electronics equipment manufacturer. It is well poised to enter into a high growth trajectory on account of anticipated increase in the Indian Defence budget. With the present government increasing the thrust on modernising military hardware and the Make in India initiative, the company is the flag bearer of India’s defence play and all set to be a key beneficiary as its prospects are directly linked with the defence spends. Since BEL is a public sector undertaking, large order preference is given to it from the security and secrecy point of view. Recently the company was selected by the Defence Ministry as a development agency for a project worth Rs 35,000 crore to be implemented over the next five to seven years. This move was made to indigenise the country’s Defence procurement and is a step in the right direction. This will gain momentum in the coming years as India’s Defence spending is set to expand and explode and become one of the highest in the world. With the company increasing focus on research and development and moving towards being a system integrator, it is an absolute growth cum value play for the long term sustainability of its business. The order book of BEL as of October 2015 is Rs 21,648 crore while fresh orders in the last quarter of the current financial year are expected to be better. The BEL stock has already formed a good base around Rs 1,270 level and it has the potential to move towards a zone of Rs 1,500 to Rs 1,600 in the next few weeks. Most analysts and fund managers are bullish on the company and expect a good outperformance from it in the midcap index. Investors can play for a target price of Rs 1,580 by April 2016 and any correction in the stock could be a short term aberration and used as an opportunity to buy with a long term investment perspective.
The first year of the new government has been mostly used up in trying to lay the foundation of the road to sustainable growth through broader reforms and efficient administration. The economy has entered the next business cycle where soft commodity prices, especially oil, is visibly translating into fiscal comfort and improvement in margins. While many would be concerned about the slow earning growth, a detailed analysis shows that corporate earnings (ex-commodity) are improving at a reasonable pace. Corporate earnings are expected to enter a positive growth trajectory driven by domestic recovery.
As expected markets were largely range bound and sluggish throughout the week. The next week would observe the release of major events such as the RBI policy, GDP numbers, Chinese data, US Fed economy outlook, etc and therefore the markets are expected to be choppy. While the downside is limited, passing of the GST Bill could be a catalyst for it to go higher. But the effect could be neutralised in the short term if the US Fed increases rates there.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.