Target: ₹1,700
CMP: ₹1,433.95
BEML’s revenue fell 18 per cent year on year in Q4FY23, 8 per cent lower than our estimates. We believe the fall is on account of rail and metro (R&M) and mining and construction (M&C), which could be due to delay in execution while defence and aerospace (D&A) may have grown on strong order book. Revenue fell 10 per cent year on year in FY23.
Order inflows spiked 111 per cent year on year in Q4FY23, however falling 2 per cent quarter on quarter, with a book-to-bill (BTB) ratio of 2.0x FY24E revenue.
We raise our TP by 12 per cent to ₹1,700 on 25x (unchanged) P/E as we roll forward to March 2025. We remain watchful of any development on BEML disinvestment.
Orderbook of ₹8,500 crore provides revenue visibility for the next two-three years, led by: execution of the Mumbai Metro and defence orders over FY23-24; strong inflow pipeline in rail, metro and defence, due to indigenisation focus; and incremental orders for mining equipment in the coal segment.
This bodes well for growth prospects. We revise to Buy from Accumulate as we expect an earnings CAGR of 34 per cent over FY23-25 vs 46 per cent over FY21-23 and a FY23-25 ROCE of 9 per cent vs 5 per cent over FY21-23.