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Bharat Electronics Ltd (BEL)

Bharat Electronics Ltd (BEL) Results update:

BEL posted strong set of numbers for the fourth quarter as the company managed to post its targeted revenue numbers for the year. For the quarter, margin expansion was aided by higher revenue booking (42% of full year revenue vs 36% in Q4FY10), change in product mix and absence of provisions for pay revisions.

Tax rate is lower possibly due to higher R&D expenditure. Even as the Capital Goods sector has struggled to book orders during the fiscal, BEL has won major orders. Resultantly, its order backlog has doubled in FY11, thus it is strongly positioned for driving revenue growth in FY13 and beyond. The company should also be a beneficiary from the offsets that are likely to accrue from the US$10 bn aircraft order that the Indian government is all set to place with Rafale or Eurofighter.

The company enjoys a dominant status in the defence sector and has a steady growth profile. At 16.2x, near-term valuations are close to the higher end of its trading range of 8-16x. The business is high-end with rich profitability and strong cash generator. In view of this, long term investors can accumulate the stock with a price target of Rs.1913.