Bharat Electronics LtdQ2 FY23Aerospace & Defense

Bharat Electronics Ltd

Q2 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Revenue guidance

Category 3

→Management projects a revenue growth guidance of around 15% to 17% for the current and coming years.
→Order inflows are expected to continue to increase, with a projection of INR 20,000 crores plus for the current year and growth beyond that in subsequent years.
→Growth drivers include large platform programs such as P75I, P76, QRSAM, and maintenance orders.
→The company anticipates maintaining an order book equivalent to 2.5 to 3 years of revenue.
→Capacity expansions across multiple locations (Pune, Nagpur, Mangalore) and the new Nagpur fuse complex aim to support increased volumes.
→Export opportunities are being aggressively pursued to scale up defense exports significantly in the next two years.
→Software services and internal software development are key growth areas, providing value-added offerings to defense forces.
→Revenue growth is also expected from indigenization and executing smaller and short-cycle orders alongside large long-term contracts.

Category 3

→Management projects revenue growth of around 15%-17% in the near future, supported by a strong order book of INR 65,000 crores.
→Guidance is maintained for gross margins at 40%-42% and EBITDA margins at 21%-23% for the current year.
→R&D expenditure will remain around 6%-7% of revenues, aiding indigenization that is expected to sustain margins.
→Order inflow is expected to exceed INR 20,000 crores this year, with growth likely to continue due to new large platforms and increased government defense spending.
→Capex guidance is INR 700-800 crores, contributing to long-term infrastructure growth but not immediately boosting earnings.
→Exports and software services are ramping up, offering incremental revenue streams.
→Management expects steady earnings growth aligned with order execution spread over 2-4 years, including large projects like QRSAM and fuses complex.

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→There is no specific mention of any current or future fundraising plans through debt or equity in the provided transcript of Bharat Electronics Limited's Q1 FY24 earnings call.
→The management focuses on capex guidance of INR 700-800 crores for the current year, funded presumably from internal resources.
→No indications or discussions around raising capital via debt or equity were disclosed during the call.
→The company plans growth through order inflows, indigenization, and infrastructure expansion, without referring to external fundraising.
→Other financial matters discussed mainly include order book, revenue guidance, margins, and provisions, but not capital raising.

Yes

→Current order book as of June 30, 2023: INR 65,356 crores (~INR 65,000 crores).
→Expected order inflow for FY24: Around INR 20,000 crores, with potential for more due to upcoming programs like QRSAM.
→Pending orders from major projects:
→ - IACCS: Pending order approx. INR 2,000 crores from INR 8,000 crores contract.
→ - Akash missile system: Very little pending; order of INR 5,300 crores almost completing in current year.
→ - LR-SAM: Expected order execution around INR 3,000 crores for FY23-24; localization ongoing as per contract.
→Nagpur fuse complex: First phase completed; building construction underway; expected completion in 2 years to address long-term fuse requirements.
→Large pipeline prospects include fuse orders, electronic warfare systems scoped at around 1,000 crores+, and about 6,000 crores+ worth of bare-nominated equipment for naval vessels.
→Management aims to maintain 2.5 to 3 years of order book revenue coverage over coming years.

Yes

→Bharat Electronics Limited plans a capital expenditure (Capex) of around INR 700-800 crores for the current financial year, which includes both maintenance and growth Capex.
→Growth Capex involves large infrastructure projects, such as new buildings and augmentation, expected to materialize over a longer term (2+ years).
→A Nagpur fuse complex is under construction with an estimated investment of around INR 200 crores over two years; Phase 1 (boundary, leveling) is done, building construction is underway, with operationalization expected in about two years.
→Other expansions include facilities for electro-optics in Nimaluru, EW systems at Ibrahimpatnam, and a microwave component complex in Hyderabad to support project execution and future growth.
→R&D expenditure remains at 6-7% of revenues to support indigenization and innovation but is separate from Capex focused on infrastructure.

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