BEL - Bharat Electronics Ltd. Share Price

Management Outlook and Key Points:
Bharat Electronics Limited (BEL) reported strong Q3 FY25 results with 23.4% revenue growth, 43.9% PBT growth, and an order book of Rs.71,100 crore as of January 2025. Key highlights:

1. Order Inflow Guidance: Confident of achieving FY25 order inflow target of Rs.25,000 crore, driven by final-stage contracts (e.g., Ashwini Radar, MI-17 upgrades, HimShakti Phase 4). Major FY26 projects include QRSAM (Rs.25,000"“30,000 crore) and MRSAM/MFSTAR for next-gen corvettes (Rs.14,000"“15,000 crore).
2. Margins: EBITDA margins improved to 28.1% (9M FY25), guided to stabilize at 23"“25% long-term. Gross margins at 44.5%, with no structural decline expected.
3. Growth Drivers:
   • Defense: Execution of LRSAM, Akash Prime, and electronic fuses; focus on anti-drone systems (D4) and exports.
   • Non-Defense: Targeting 10"“15% revenue share via Kavach (railway safety), cybersecurity, and homeland security. Kavach R&D completion expected by mid-2025.
4. Future Guidance: FY25 revenue growth >15%, FY26 order book to strengthen with QRSAM and naval projects. Export opportunities (anti-drone systems, radar tech) and indigenization efforts to support margins.
5. Innovation: Reforms in AI/robotics, with new products like battlefield surveillance systems.

Management reaffirmed confidence in meeting targets, emphasizing execution agility and diversification into high-potential sectors.

Question 1: Are order inflows expected to sustain a sharp pickup in Q4? What is the latest guidance for FY25 order inflows?
Answer: BEL remains confident in achieving its FY25 order inflow target of Rs.25,000 crores, with Rs.11,000 crores secured so far. Key projects like Ashwini Radar, MI-17 upgrades, and HimShakti Phase 4 are in advanced contract finalization stages and expected to materialize in the next two months.

Question 2: What is the update on QRSAM and future pipeline orders for FY26?
Answer: The QRSAM project is progressing, with configuration discussions between the Army and Air Force resolved. The order (estimated at Rs.25,000"“30,000 crores) is expected within 6"“12 months, likely by March 2026. Future large orders include MRSAM and MFSTAR systems for next-gen naval corvettes (Rs.14,000"“15,000 crores).

Question 3: Which orders drove Q3 execution, and will FY25 guidance be revised given strong performance?
Answer: Key executed orders included LRSAM, weapon-locating radars, IACCS, Shakti EW, Akash, and CBIC. BEL retains its FY25 guidance: >15% revenue growth and 23"“25% EBITDA margins, with potential upward revisions to be finalized later.

Question 4: Are delays in HAL's LCA program impacting BEL's order execution?
Answer: BEL supplies electronic modules for LCA Mk-1/1A as per HAL's schedule, with no disruptions. Production bottlenecks were resolved last year, and supplies for 97 additional LCAs (Mk-1A) are under discussion.

Question 5: What is the contribution of non-defense segments, and what is the outlook for Kavach orders?
Answer: Non-defense contributed ~8% (excluding 3% export mix). Kavach is in R&D/prototype testing, with certification expected by mid-2025. Post-certification, BEL aims to bid for larger railway tenders. Non-defense targets 10"“15% share in 2"“3 years.

Question 6: Are gross margins structurally improving beyond the guided 42"“44% range?
Answer: Gross margins for 9M FY25 were 44.5%, within the guided range. BEL expects margins to stabilize around 42"“44%, factoring in indigenization benefits and cost negotiations with the Ministry of Defence.

Question 7: What is BEL's role in India-Russia long-range radar deals?
Answer: BEL's involvement in the proposed $4 billion radar deal is undecided as it is a G2G negotiation. The company expects a significant role if the MoD assigns localization or integration responsibilities.

Question 8: How will the 8th Pay Commission impact employee costs?
Answer: Wage revisions (effective January 2027) will impact FY27 costs marginally (~3 months). Employee cost-to-turnover ratios are expected to remain stable due to projected revenue growth.

Question 9: What is BEL's role in MRSAM and P-75/P-75I submarine programs?
Answer: BEL focuses on indigenizing MRSAM electronics, with no direct missile role. For submarine programs, BEL expects "four-digit" electronic component orders, details to be finalized by April 2025.

Question 10: What is the execution timeline for QRSAM and NGC orders?
Answer: QRSAM execution will span 18"“24 months for initial 5"“10% value, with the rest over 2+ years. NGC orders (Rs.14,000"“15,000 crores) will execute over 4"“5 years, contributing Rs.2,000"“3,000 crores annually.

Question 11: How will FY26 revenue growth fare with flat order book projections?
Answer: FY26 growth will rely on base orders (Rs.15,000 crores) and new large orders (QRSAM, NGC). Order book will strengthen post-April 2026 as new projects materialize.

Question 12: What is BEL's position on Uttam Radar and anti-drone systems?
Answer: Uttam Radar integration is HAL's responsibility; BEL may supply submodules. For anti-drone systems, BEL leads in high-end solutions (D4) with domestic/international orders, including BSF and export discussions.

Question 13: What is the breakup of the Rs.71,100 crore order book?
Answer: Defense constitutes 88"“89%, non-defense 10"“11%. Major projects include electronic fuses (Rs.2,500"“4,500 crores), LRSAM, Akash Prime, BMP-2 upgrades, and HimShakti, totaling ~Rs.18,000 crores.

Question 14: What reforms is BEL undertaking under the MoD's "year of reform"?
Answer: BEL is prioritizing AI, robotics, and new product launches (e.g., battlefield surveillance systems) to align with MoD's modernization goals, with more announcements planned in 2025.

Question 15: Final FY25 guidance and FY26 outlook?
Answer: FY25 guidance: >15% revenue growth, 23"“25% EBITDA margins, and Rs.25,000+ crore order inflow. FY26 order inflow is projected at Rs.25,000"“50,000 crores, driven by QRSAM and naval projects.