Sunday, February 25, 2024
Home News Fundamental Analysis Of Bharat Dynamics

Fundamental Analysis Of Bharat Dynamics

 

Fundamental Analysis of India Dynamics: Defense stocks have been a favorite of investors ever since Honorable Prime Minister Narendra Modi announced initiatives to modernize and upgrade India’s defense capabilities, in the process of boosting indigenous supply of equipment. Bharat Dynamics Limited (BDL), a Mini-Ratna Small-Cap stock is one such gainer company. In this article, we will do a fundamental analysis of Bharat Dynamics, and see if it is a good defense pick.

Take out the Trader in Fingrad Banner

Fundamental Analysis of India Dynamics

We’ll begin our fundamental analysis of BDL by learning about business. Next, we will read about the Defense Industry scenario and recent developments. Then, we’ll race through the stock’s financials to see how the company has performed over the years. A section on future plans and a summary round out the article.

Company Overview

Bharat Dynamics Limited (BDL) is a Defense Public Sector Company under the Ministry of Defence, Government of India. It was established over 5 decades ago in 1970 and currently has a market capitalization of Rs 16,500 crore.

This Public Sector Undertaking (PSU) is involved in manufacturing a wide range of defense equipment: Surface to Air Missile (SAM), Air to Air Missile, Anti-Tank Guided Missile (ATGM), Torpedoes and allied defense equipment.

BDL is headquartered in Hyderabad, Telangana and has three production facilities located in Telangana and Andhra Pradesh. As of March 2022, a total of 2,674 people were employed in the government company.

Recently, the management has taken three major steps towards expansion of the company:

  1. Setting up more manufacturing sites in Maharashtra, Uttar Pradesh, Telangana etc.
  2. Sale of certain defense products abroad
  3. Strategic tie-up with other PSUs and private sector companies

industry Overview

Recent years have proved to be a boon for the country’s defense sector. The Central Government has announced several initiatives to promote the development of this sector. This includes procuring domestically produced defense equipment, putting select products on the list of restricted imports, and higher defense expenditure.

As recently as in February this year, Finance Minister Nirmala Sitharaman announced that the government has made a massive allocation of Rs 5.94 lakh crore for the country’s defense needs for 2023-24. This is 13% more than the previous year’s allocation of Rs 5.25 lakh crore.

This figure includes personnel salaries, modernization of the armed forces, production facilities, maintenance costs, and research and development establishments.

But it is not that India’s defense expenditure is only increasing. The allocation of capital expenditure has increased as a percentage of the total defense budget. Capital expenditure for infrastructure modernization and development is set to increase by 57% from 2019-20 to Rs 1.62 lakh crore in 2023-24.

Thus, we can say that overall the recent developments have put the country’s defense sector in good shape.

Bharat Dynamics – Financials

revenue and net profit growth

In the past six years, Bharat Dynamics Ltd’s operating revenue has declined from Rs 4,887 crore in FY17 to Rs 2,817 crore in FY22. During the same period, net profit has remained largely stable due to improving profit margins.

The table below shows the operating revenue and net profit of Bharat Dynamics for the last five financial years.

financial year operating revenue Net Profit
2022 2,817 500
2021 1,914 258
2020 3,095 535
2019 3,069 423
2018 4,588 528
2017 4,887 524
(Figures in Rs crore)

operating and net profit margin

From the below figures we can see that the operating profit and net profit margin of the company have improved significantly over the years. This has helped the business maintain its bottom line.

The figure given below shows the profit margin of BDL for the last five financial years.

financial year OPM npm
2022 21.25 17.74
2021 12.87 13.47
2020 20.24 17.29
2019 17.44 13.77
2018 14.87 11.51
2017 12.3 10.72
(figure in %)

In the next section on fundamental analysis of Bharat Dynamics, we will see how profitable the business is by analyzing the stock’s Return Ratios: ROCE and ROE.

Return Ratio: ROCE and ROE

Return Ratios: Return on capital employed (ROCE) and return on equity (ROE) have fallen sharply over the years as BDL’s equity base has expanded due to past gains but bottom line growth has been nil. Thus, we can conclude that the management is finding it difficult to invest profits to generate higher returns for its shareholders.

The table below highlights the declining yield ratios of Bharat Dynamics.

financial year ROE roce
2022 17.6 25.2
2021 9.8 13.2
2020 22.2 30.9
2019 20.2 32.3
2018 25.8 37.9
(figure in %)

Apart from the decreasing return ratio, we can also note that ROE is less than ROCE in all the years. This tells us that management has applied little or no financial leverage to the business, thus reducing the net return for investors because the cost of debt is cheaper for the company than the cost of equity.

We will read about this in the next section by studying the debt of the stock.

Debt / Equity and Interest Coverage

We’ll move quickly through the debt analysis of Bharat Dynamics as it is a debt-free stock with a high-interest coverage ratio. We can see in our table below on debt/equity and interest coverage ratio that the company has been debt free for a number of years.

financial year debt equity interest coverage
2022 0.0 245
2021 0.0 112
2020 0.0 160
2019 0.0 160
2018 0.0 237

Future plans of Bharat Dynamics

Till now we looked at the data of the last financial year for the fundamental analysis of BDL. In this section, we will try to understand what lies ahead for the company and its investors.

  1. As of March 2023, the company’s order book stood at Rs 13,708 crore, which is almost 5 times its FY2022 revenue, providing strong revenue visibility.
  2. The management has estimated a CAPEX of Rs 80 crore during the FY23 period, lower than the Rs 103 crore spent in FY22.
  3. BDL is also exploring export opportunities and has an assortment of products worth Rs 2,688 crore that can be sold overseas. In line with this, it has obtained information from various entities in 21 countries for the supply of its defense equipment.
  4. As mentioned above, BDL is also in the process of setting up additional production sites and export capabilities.

key metrics

We are almost at the end of our fundamental analysis of India dynamics. Let us have a look at some key metrics of the stock.

cmp ₹906 Market Cap (Cr.) ₹16,500
eps ₹25.3 stock p/e 34.1
roce 17.6% ROE 25.2%
promoter holding 74.9% book value ₹171
debt to equity 0.0 price to book value 5.32
net profit margin 17.74% operating profit margin 21.25%

in conclusion

Shares of Bharat Dynamics have gained nearly 60% in the past twelve months on hopes of bright prospects for the defense PSU. Even though the company hasn’t grown much in the past, broad sentiment is upbeat about future performance. Thus, investors of BDL should keep a close eye on the quarterly results and progress on the company’s export revenue.

Do you think the current share price of BDL is fair? Will the company be able to generate higher sales and profits in the near future? How can we keep this conversation going in the comments below?

Now you can get latest updates in share market business minded news and you can also use our trade brain screener To find the best stocks.

Download Tradebrain Portal App

Vikalp Mishra is a commerce graduate from University of Delhi. He loves writing on finance, money and business. He is a voracious reader and has a genuine interest in investing. Mail him at vikalp.mishra@tradebrains.in.


Start your stock market journey today!

Want to learn Stock Market Trading and Investing? Be sure to check out the exclusive stock market courses by FinGrad, a learning initiative by Trade Brain. You can enroll in the free courses and webinars available on FinGrad today and move forward in your trading career. join now!!

RELATED ARTICLES

Markets end FY23 in style; Sensex Nifty rally nearly 2% on firm global trends

Market, The final day of the fiscal year 2022-23 saw gains for benchmark indices, with a gain of nearly 2% on Friday, extending gains for...

Day trading guide for today: 6 stocks to buy or sell on Friday — 31st March

Trading, Day trading guide for today: Indian shares gained on Wednesday as global markets' increased risk appetite was aided by easing in the banking industry....

Financial, IT stocks aid Indian shares snap three-month losing streak

Financial, By Bharat Rajeshwaran BENGALURU (Reuters) - Indian shares rose on Friday, supported by a higher weighting of financial stocks and information technology (IT) stocks,...

LEAVE A REPLY

Please enter your comment!
Please enter your name here

SIGNUP & GET $10000 BONUS

Most Popular

Trading the Inside Bar Pattern on Pocket Option Platform

Inside Bar Pattern Introduction Price movement on a chart is examined in price action trading. You may use candlesticks to predict where prices will move...

“Unlocking the Secrets: 4 Tricks of Successful Traders on Pocket Option Platform”

For a year, I have been trading on the Pocket Option platform. I sometimes succeed and sometimes fail. However, I was confident that if...

Identifying Mistakes That Lead to Losses on Pocket Option

Why do people lose their money when trading binary options New traders frequently take a significant financial risk while trading binary options. As a result,...

Weekly Income Plan on Pocket Option Platform”

Get weekly returns on Pocket Option It turned out that October was a terrific month for me. I am still able to generate money every...

Recent Comments