Bharat Electron

Bharat Electronics Limited reported a robust H1 FY25 with a turnover of INR8,500 crores, marking a 15.83% year-on-year growth compared to INR7,365 crores in H1 FY24. Profit After Tax (PAT) saw a significant increase of 39.03%, reaching INR1,867 crores from INR1,343 crores in the prior year. The company's EBITDA margin expanded to 27.26% in H1 FY25, up from 22.66% in H1 FY24, primarily attributed to a favorable product mix during the period.

As of October 1, 2024, BEL's order book stood at INR74,595 crores. The company recorded approximately INR7,500 crores in order inflows during H1 FY25 and remains highly confident in achieving its full FY25 order inflow target of INR25,000 crores. Key orders anticipated to contribute to this target include Ashwini Radar (~INR2,500 crores), Electronic Warfare Suite for MI-17 (INR2,000 crores), ATULYA Order (INR2,000 crores), and Shakti Phase IV (INR2,000 crores), all of which are in advanced stages or L1 status.

Operating cash flow for H1 FY25 was negative by approximately INR2,300 crores, a situation management explained as a deliberate build-up of inventory. With inventory at around INR9,000 crores, the company is preparing to achieve its ambitious H2 FY25 turnover target of INR14,500 crores, aiming for a total FY25 turnover of INR23,000 crores. Major projects slated for execution in H2 include LRSAM (~INR1,600+ crores), Himshakti (~INR800-900 crores), and Akash Army (~INR500 crores).

BEL achieved a gross margin of 45% in H1 FY25, exceeding its full-year guidance of 42%, primarily due to a favorable product mix. Management reiterated the full-year gross margin guidance of 42% and an EBITDA margin guidance of 23-25%. The company's continuous efforts in indigenization of modules and subsystems are expected to further enhance profit margins in the long term by providing cost-optimal and technologically advanced solutions to its defense customers.

BEL has established five new Strategic Business Units (SBUs) to drive future growth and diversification. The EW Land Systems SBU in Hyderabad is projected to achieve over INR1,500 crores in turnover this year, while the RF Seeker SBU is expected to reach INR350-400 crores. The company aims for all five new SBUs, including Arms & Ammunition, Network & Cyber Security, and Unmanned Systems, to individually achieve INR1,000 crores in turnover within the next 2-3 years, with initial direct sales already commencing for the Cyber Security SBU.

The naval segment is identified as the most promising growth area for BEL, driven by increasing platform numbers, product upgrades, and the introduction of new electronic subsystem portfolios. The company is actively increasing its indigenization content in naval projects, including indigenized MFRX radars and integrated sonar suits for submarines. These efforts are contributing to BEL's growing wallet share in the naval sector and are a key part of its strategy to enhance its offerings.

BEL maintains a low attrition rate of 2-3%, which management considers manageable. To support its growth trajectory, indigenization, and R&D initiatives, the company plans to hire a minimum of 1,000+ permanent employees and an additional 1,000+ other variety manpower (trainee engineers, project engineers) within the next 12 months. BEL is actively engaging with IITs and NITs, offering competitive reward and recognition schemes to attract quality talent.

BEL is committed to increasing its export contribution, targeting over 3% of turnover next year and a long-term goal of 10%. The current export order book stands at approximately $403 million, with a target to acquire over $200 million in new export orders this year. The export pipeline includes significant projects such as RWR MAWS for Airbus T295, compass-related orders, and Gimbals-related orders from Elbit systems for export to other countries, alongside other big leads from Brazil and Egypt.