Morgan Stanley has reiterated its ‘Overweight’ rating on Bharat Electronics Ltd (BEL) with a target price of ₹364, following a strong Q4FY25 performance that beat estimates across revenue, EBITDA, and net profit. The brokerage sees further upside driven by sustained margin expansion, improving cost efficiencies, and strong order book visibility.
BEL reported a 7% year-on-year increase in consolidated revenue, while EBITDA and adjusted PAT rose 23% and 23% YoY, respectively. The results were ahead of Morgan Stanley’s estimates by 4% for revenue, 44% for EBITDA, and 39% for PAT — marking one of the company’s strongest quarterly beats in recent times.
Margins expand sharply on lower costs
Gross margins contracted marginally by 40 basis points YoY; however, EBITDA margins improved by 405 basis points YoY, aided by significant cost rationalization. Notably, employee costs rose 20%, but other expenses declined 33%, resulting in overall improvement in profitability.
Morgan Stanley flagged that other expenses were just 8.9% of sales, the lowest level since Q4FY22, underlining BEL’s operational discipline and tight cost controls.
Working capital stress rises, but cash flows steady
While operating cash flow for FY25 stood at ₹5.9 billion, it was significantly lower compared to ₹46.6 billion in FY24. This decline was attributed to an increase in net working capital days by 29 YoY, driven by a 7-day increase in inventory and a 6-day rise in receivables. Payables, however, improved by 16 days.
Despite the working capital drag, BEL incurred capex of ₹10 billion, above its earlier guidance of ₹8 billion, reflecting its continued investment in R&D and manufacturing capacity to support future orders.
Order book at ₹71,600 crore, remains healthy
Morgan Stanley noted that BEL’s order book stood at ₹71,600 crore, down 6% YoY, but still offering multi-year revenue visibility. With the Ministry of Defence increasingly focused on indigenous procurement and BEL’s growing strength in radar, communication, and missile systems, the company remains a core defence PSU play.
“BEL’s margin performance and cost control were standout this quarter. With a strong base and supportive policy tailwinds, we expect the company to maintain sector-leading profitability,” Morgan Stanley said.
