BELNSEQ3 FY2023February 02, 2023

Bharat Electronics Limited

7,653words

154turns

15analyst exchanges

2executives

Download PDF ↗BEL stock page →

Management on call

Harshit Kapadia

ELARA SECURITIES PRIVATE LIMITED

Sreenivas S

COMPANY SECRETARY - BHARAT ELECTRONICS LIMITED

Key numbers — 40 extracted

Rs.11005 Crore

Brief highlights of Bharat Electronics for Q3 performances are that our turnover has increased to Rs.11005 Crores up to Q3 2022-2023 as compared to Rs.8842 Crores corresponding year last year with a growth of 2

Rs.8842 Crore

ormances are that our turnover has increased to Rs.11005 Crores up to Q3 2022-2023 as compared to Rs.8842 Crores corresponding year last year with a growth of 24.46%, profit before tax increased to Rs.2203 C

24.46%

es up to Q3 2022-2023 as compared to Rs.8842 Crores corresponding year last year with a growth of 24.46%, profit before tax increased to Rs.2203 Crores as compared to Rs.1631 Crores of corresponding Q3

Rs.2203 Crore

842 Crores corresponding year last year with a growth of 24.46%, profit before tax increased to Rs.2203 Crores as compared to Rs.1631 Crores of corresponding Q3 figure up to Q3 last year with a growth of 35.

Rs.1631 Crore

r last year with a growth of 24.46%, profit before tax increased to Rs.2203 Crores as compared to Rs.1631 Crores of corresponding Q3 figure up to Q3 last year with a growth of 35.07%. PAT increased to Rs.1641

35.07%

ores as compared to Rs.1631 Crores of corresponding Q3 figure up to Q3 last year with a growth of 35.07%. PAT increased to Rs.1641 Crores up to Q3 as compared to Rs.1207 Crores up to Q3 last year with a

Rs.1641 Crore

31 Crores of corresponding Q3 figure up to Q3 last year with a growth of 35.07%. PAT increased to Rs.1641 Crores up to Q3 as compared to Rs.1207 Crores up to Q3 last year with a growth of 35.97%. EBITDA has in

Rs.1207 Crore

o Q3 last year with a growth of 35.07%. PAT increased to Rs.1641 Crores up to Q3 as compared to Rs.1207 Crores up to Q3 last year with a growth of 35.97%. EBITDA has increased to 20.20% up to Q3 as compared

35.97%

ased to Rs.1641 Crores up to Q3 as compared to Rs.1207 Crores up to Q3 last year with a growth of 35.97%. EBITDA has increased to 20.20% up to Q3 as compared to 19.69% of corresponding figure last year

20.20%

compared to Rs.1207 Crores up to Q3 last year with a growth of 35.97%. EBITDA has increased to 20.20% up to Q3 as compared to 19.69% of corresponding figure last year and EPS has increased to Rs.2.25

19.69%

p to Q3 last year with a growth of 35.97%. EBITDA has increased to 20.20% up to Q3 as compared to 19.69% of corresponding figure last year and EPS has increased to Rs.2.25 up to Q3 as compared to Rs.1.6

Rs.2.25

20.20% up to Q3 as compared to 19.69% of corresponding figure last year and EPS has increased to Rs.2.25 up to Q3 as compared to Rs.1.65 corresponding figure last year. Our order book position stands at

Advertisement

Guidance — 20 items

Bhanu P Srivastava

“So if you see that come together what guidance we were given at end of the financial year close to 20000 Crores, we are working on that and we are confident that we will be reaching close to our guidance of around 20000 Crores, it is iterative process where it goes through various levels and especially the value of the order is bigger.”

Ankur

“For 2024 also you would expect a similar number because the QRSAM has progressed well right?”

Bhanu P Srivastava

“QRSAM has progressed well, trials have been completed and we expect QRSAM to fructify maybe next financial year.”

Ankur

“Just last one before I handed back we have seen quite a few changes in the top management over the last few quarters on the KMP side, so if you could just help me I am assuming the new KMPs are here for some time to come, so could you just help me the remaining tenure, so for example both for the MD, the CFO, the Director Marketing Operations, there is some sense on can we expect some stability there for the remaining tenure of the KMPs in the company?”

Deepesh Agarwal

“My first question is if we see your order book in the last four years it has remained flattish at around Rs.50000 Crores whereas revenue base has gone up, so now going ahead what gives us confidence of achieving a double digit growth for next year and FY2025?”

Bhanu P Srivastava

“This year we have given a guidance of 15% plus and next two years definitely it will be much better than 15% plus, our target is somewhere closer to 20%.”

Deepesh Agarwal

“Sure, can you highlight the key orders expected in fourth quarter and next year?”

Deepesh Agarwal

“Related question next year do you expect one regiment of QRSAM will come or two regiments because one regiment itself be Rs.12000 Crores?”

Bhanu P Srivastava

“Let us see because trials are all completed and it depends upon the budgets of the defence forces whether they target one or two regiments defence allocation and also we will see our expectation is based on the budget availability of defence forces and how they progress.”

Amit Dixit

“The first one is on essentially if you could quantify some of the order booking that we expect in the rest of FY2023 because last time we indicated that we will get Himshakti programme of around Rs.3300 Crores, Atulya medium power radar, so where we are on these, also if you can mention the status of Akash Prime which was around Rs.3000 to 4000 Crores that would be helpful?”

Risks & concerns — 3 flagged

One you are starting with the order inflows and we have clearly seen very weak orders for the last three quarters typically at least base orders also come to about Rs.2500 Crores, but clearly this year even those have not fructified, so if you could help us, a) why have orders been so weak and b) what is your (audio cut) 4:09?

— Ankur

Last one, this Swathi Radar which was sold to the Armenian armed forces, there is news that there was some leakage on specific details and specifications by some Armenian army personnel for that specific radar would that therefore make the government a little more sort of reluctant in trying to build export base because these are strategic assets while export potential is there these sort of events might be difficult to digest for the armed forces in India?

— Gagan Thareja

This year we hit 70000 odd Crores on sales on 15% guidance the next year you have indicated around 15 to 20% so we will meet that 20000 Crores which is our current inflow run rate and for 2024 is also similar guidance I just wanted to know beyond 2024 in the next two to three years say 25 to 27 odd what type of annual inflow are you currently envisaging I know it is difficult but if you can give some subjective equity to that it will be very helpful for us?

— Abhineet Anand

Advertisement

Q&A — 15 exchanges

Good morning. Thanks for your time. I had a couple of questions. One you are starting with the order inflows and we have clearly seen very weak orders for the last three quarters typically at least base orders also come to about Rs.2500 Crores, but clearly this year even those have not fructified, so if you could help us, a) why have orders been so weak and b) what is your (audio cut) 4:09? BHA#AT£L£CTfiON/CS QUALITY, TECHNOLOGY. INNOVATION

Bhanu P Srivastava

Normally defence order book slumped in Q4 because the process it goes through it is a lengthy process, so around 3600 Crores order was booked up to Q3. When we see the breakup around 12000 Crores worth orders where PNC is already concluded by our customers and they are under various stages of processing and another round 3500 where we have already submitted the bid and these are processed. So if you see that come together what guidance we were given at end of the financial year close to 20000 Crores, we are working on that and we are confident that we will be reaching close to our guidance of

Good morning Sir. My first question is if we see your order book in the last four years it has remained flattish at around Rs.50000 Crores whereas revenue base has gone up, so now going ahead what gives us confidence of achieving a double digit growth for next year and FY2025?

Bhanu P Srivastava

There are two aspects since we are targeting double digit growth one is that growth in defence market and another is our diversification, our expansion in other areas, civilian market as well as exports, so we are working in all three aspects. We are leveraging our knowledge and expertise in defence field to further enhance and diversify in civilian field. So I will mention few important things. We have tied up with Airport Authority of India for development of air traffic management system and Airport Surveillance Radar and related BHA#AT£L£CTfiON/CS QUALITY, TECHNOLOGY. INNOVATION equipment

Good morning everyone. Thanks for taking my question Sir. I had couple of questions. The first one is on essentially if you could quantify some of the order booking that we expect in the rest of FY2023 because last time we indicated that we will get Himshakti programme of around Rs.3300 Crores, Atulya medium power radar, so where we are on these, also if you can mention the status of Akash Prime which was around Rs.3000 to 4000 Crores that would be helpful?

Bhanu P Srivastava

Himshakti CNC is already over a month back and it is under process, so it should come Arudhra radar CNC is already over. As far as Akash Prime is concerned it is a BDL order and it is there with CCS the moment CCS concludes. We are ready with negotiating with BDL. So whatever you are mentioning links you to FCS CNC is complete. EW suite for Mi-17 upgrade CNC is complete, so that is what I was mentioning that most of the big orders where we were discussing we are already crossed over the CNC stage and it is only government to process internal process and approval. The second question is essenti

Thank you for the opportunity. My first question is on the services. Can you share inputs in terms of how has been the growth of services in third quarter and for the nine months and given that more AMC contracts are coming now from air force and probably even possible from army what is the kind of growth that we are expecting for this line of revenue?

Damodar Bhattad S

Can you just repeat it? I just wanted to understand what is the share of service revenues in nine month period? Around 10%, out of 11000 around Rs.1000 Crores is service revenue. Are we expecting slightly better growth in this revenue stream with more AMC contracts on books or should be broadly in this range only? Current year it will be broadly in this range only 90:10 ratio will be there for the current year. Secondly if I come back to gross margins now since you are sharing that we expect the RMP sales will be broadly flattish just like nine months for the full year I want to understand whe

Very good morning gentlemen. The first question is on the Triton electric vehicle order that we supposed to get there were some pilot matches that we were expected to supply in the December quarter based on this there were negotiations that were supposed to happen for larger order over there if you could update us on the status of that as well as what is the expected size of the order that you are likely to get some timelines that would help?

Bhanu P Srivastava

That was one indication but for systems we are still to get so may be another one or two months will get, but it will take time so we have not factored what Triton the projection was there in our revenue stream as of now. Let us see how it moves ahead, how Triton itself move ahead in their business and how it is going to be linked with us. So as of now that is going a bit slow. Understood and second question again just reiterating on the order inflow part we used to share some sense on the larger orders if not all given the tentative size what they have given indication that in Shakti and Arud

My question is regarding civil part of the business, where do you see five years from now it is contributing you said around 20% now and what are the margins for that business as compared to defence?

Damodar Bhattad S

We feel that ratio of defence to civil in the next four, five years continued to be in the range of 75:25 or 80:20 like that defence would be always in the main sum and 20 to 25 maximum will be civil not more than that in the coming four, five years and as far as margins are concerned basically we do not give segment wise information as we are exempted from the same, so we would like to refrain from that for defence and civil separately we would not like to tell those because we are exempted from the segment wise. Lastly many MoUs at the defence expo, so any progress on those MoUs? These are M

The first question is on the future margins you indicated sales growth could be in the corridor of 15% to 20% possible bias towards 20% would we be in a position to maintain our current margin profile going ahead as well despite of any mix change in sales?

Damodar Bhattad S

Yes, we will be able to maintain these margins whatever we are stating now. Any headroom to further increase them with some sort of cost efficiencies or increase localization? Our guidance will remain the same range what we are giving, so till that we will be increasing our margins just now as it is, but guidance remains in the same range as of now. BHA#AT£L£CTfiON/CS QUALITY, TECHNOLOGY. INNOVATION Last one, this Swathi Radar which was sold to the Armenian armed forces, there is news that there was some leakage on specific details and specifications by some Armenian army personnel for that sp

Yes thanks for taking my question. Just to understand your thoughts as to the reasons why the other equipment budget of the air force was not utilized this year what are the drivers that led to this unutilization of the budgets that were allocated to them and whether this had any bearing on BEL?

Company Speaker

Air force has not utilized it has got a broad area BEL is one part of that so they have to answer that because lot of big ticket procurement also they have so where they have used where they have not used but as far as our supplies are concerned we are on track and wherever payment is due they are paying. Right and Y-o-Y barring air force there is no other growth areas that we see within the other equipment domain be it for army or be it for navy? See we are very closely working with navy and we are there in all level programmes. If you see any new ship or submarine they are getting inducted w

Hi Sir thank you. Sir I had two specific questions first on capex I think last year we incurred around 5 to 6 billion plus on expanding LRSAM and Akash facilities so how do we see that maybe in this and next year where will that go?

Company Speaker

The capex is expected to be around 600 Crores in the current year and as far as building facility in capex is concerned we are very aggressive and if you see we are building quite few infrastructure or factories, new factories to take care of our growth. One of them we are building advanced night vision factory at Nimmaluru which is 15 km from Machilipatnam where we are spending close to around 340 Crores it will be state-of-art night vision equipment factory then we are establishing D29 manufacturing facility in Bengaluru then we are establishing electronic warfare for ground-based equipment

Good morning everyone and thanks for the opportunity. The first question that I had was on I think there was a question recently last speaker had asked on a nomination based share of a backlog which is 75% to 80% wanted to get a sense of how much of this share is coming under the new pricing regime and just wanted to get some sense because I understand LRSAM is there but it will be good to know how much of the 75% to 80% is coming from the new pricing regime?

Company Speaker

Whatever orders we get will be under the pricing regime what is prevalent as of date last three to four years. Whatever government has formulated the guidelines no one orders will be falling with that guideline only but at the same time as we have told earlier and we repeated the cost efficiency is built in to this margins. Understood so one should assume that the new pricing regime would have no impact on margins incrementally? This has come around 3 to 4 years back and 3 to 4 years performance is there in front of you so you can just guess by that. Understood and the second question that I h

Thank you for the opportunity Sir. Sir I have couple of questions. First I would like to know as you said that non-defence is rightly contributor of 20% so your non-defence has several fields from fiber security to semiconductors to anything so what is the gross margin for these overall so we can understand as you said that going forward it will be 75:25 so we can understand whether it is margin activity or margin entirety?

Company Speaker

As we are mentioning earlier in the non-defence also there are so many different segments where we are operating and it could be homeland security, it could be EVM VVPAT, it is healthcare segment, it is for metro solutions, so each one has got different margins. What guidance we are giving is for the overall margins for the revenue what we are projecting so we stand by the guidance what we have given so individual margins will be different and it will be varying so we cannot tell that it will be this much in metro, this much in homeland security that we would not like to talk on that. My next

Yes good morning Sir. My question is our employee benefit expense has gone up by 70 Crores is it some addition or some more items and with the increase in this fashion? BHA#AT£L£CTfiON/CS QUALITY, TECHNOLOGY. INNOVATION

Company Speaker

No employee benefit expenditure has gone up due to reasons like DNS increase and recruitment of some contract it is from labor and actuarial valuation so it is normal increases only. In one of the last con calls we have mentioned about the US order and you are pretty optimistic about it how is it going now? Which particular one you are talking of? There was one US order from US company the trial order was to be done then the size of the order could.. It is going slow we have not factored in our projections. So any scope of increase there? As of now we are working on only first system and we ar

Yes thanks for the opportunity. I just wanted to know slightly medium term view. This year we hit 70000 odd Crores on sales on 15% guidance the next year you have indicated around 15 to 20% so we will meet that 20000 Crores which is our current inflow run rate and for 2024 is also similar guidance I just wanted to know beyond 2024 in the next two to three years say 25 to 27 odd what type of annual inflow are you currently envisaging I know it is difficult but if you can give some subjective equity to that it will be very helpful for us? Thank you.

Company Speaker

See we are working on many technology and many programmes for defence services and others and the way services projections, long-term projections are there we envisage the same 15 to 20% growth in long term. Our programmes will be linked to the defence budget and defence budget will be definitely on increasing trend only as we can foresee that from last year it was 1.52 lakh Crores it has been increased to 1.62 lakh Crores so consequently as the budget increases our minimum BHA#AT£L£CTfiON/CS QUALITY, TECHNOLOGY. INNOVATION share will remain and with the fair growth whatever technology program

Sir I would like to know how much is the exports order book currently?

Company Speaker

Exports order book is around 2000 Crores as of now. What are our expectations for the next couple of years in terms of exports? We are working with many countries but normally if you see that exports is more towards G2G also because guidelines of government of India where there are strategic interest and what guidance are there and where we can put it our services so we are working like a question was there we have supplied something to Armenia, then Mauritius we are working on some projects, Malaysia we had discussion, then President of Egypt was there for some of the products so we are worki

Thank you Michelle. We would like to thank Shri. Bhanu Prakash Srivastava, our Chairman and Managing Director, Shri. Damodar Bhattad – Director Finance and CFO and Shri. Sreenivas – Company Secretary for giving us an opportunity to host this call. We would also like to thank all investors and analysts for joining this call. Any closing remarks you want to highlight the investor Sir.

Bhanu P Srivastava

Thank you very much for coming together and having a broad idea. I can only say that BEL is a technology driven company and we are very few company in the country where we invest heavily on research and development. If you see our results 7% plus of our turnover we spend on R&D. We have a very strong R&D base and that is how we are able to maintain our growth and profitability and all these things because of our strong R&D base. Close to 2700 engineers and scientists are working in R&D with us so that is the key strength of Bharat Electronics and that is how we are able to sustain and grow. So

Speaking time

Company Speaker

Bhanu P Srivastava

Moderator

Damodar Bhattad S

Renu Baid

Ankur

Gagan Thareja

Deepesh Agarwal

Aditya Mongia

Amit Mahawar

Advertisement

Opening remarks

Harshit Kapadia

Thank you Michelle. Good morning everyone. On behalf of Elara Securities we welcome you all for the Q3 FY2023 and nine months FY2023 earnings conference call of Bharat Electronics Limited. I take this opportunity to welcome the management of Bharat Electronics represented by Shri. Bhanu Prakash Srivastava, Chairman and Managing Director, Shri. Damodar Bhattad, Director Finance and CFO and Mr. Sreenivas S, Company Secretary along with their team. We will begin the call with a brief overview by the management followed by Q&A session. I will now hand over the call to Mr. Srivastava Sir for his opening remarks. Over to you Sir!

Bhanu P Srivastava

Good morning to all of you. On behalf of Bharat Electronics I welcome all investors on this conference. Brief highlights of Bharat Electronics for Q3 performances are that our turnover has increased to Rs.11005 Crores up to Q3 2022-2023 as compared to Rs.8842 Crores corresponding year last year with a growth of 24.46%, profit before tax increased to Rs.2203 Crores as compared to Rs.1631 Crores of corresponding Q3 figure up to Q3 last year with a growth of 35.07%. PAT increased to Rs.1641 Crores up to Q3 as compared to Rs.1207 Crores up to Q3 last year with a growth of 35.97%. EBITDA has increased to 20.20% up to Q3 as compared to 19.69% of corresponding figure last year and EPS has increased to Rs.2.25 up to Q3 as compared to Rs.1.65 corresponding figure last year. Our order book position stands at Rs.50116 Crores as on January 1, 2023, so these are in brief major achievements up to Q3. Over to you!

Advertisement

← All transcripts BEL stock page →

Bharat Electronics Limited

Market Movers