Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bharat Electronics Ltd (BOM:500049, Financial) reported a 15.83% increase in turnover for Q2 FY25, reaching INR8,530 crore compared to INR7,365 crore in the previous year.
- Profit before tax rose by 40.05% to INR2,488 crore, and profit after tax increased by 39.03% to INR1,867 crore.
- The company's EBITDA margin improved to 27.26% from 22.66% in the previous year.
- Earnings per share increased to INR2.55 from INR1.84, indicating strong shareholder returns.
- The order book as of October 1, 2024, stands at INR74,595 crore, showcasing a robust pipeline of future projects.
Negative Points
- Operating cash flow was negative at INR2,300 crore due to a substantial rise in debtors and inventory, raising concerns about cash management.
- The company is facing challenges in managing working capital, with a current ratio of 1.6, which has been consistent over the past few years.
- There are delays in receiving large orders, such as the 3D radar and electronic warfare projects, which could impact future revenue targets.
- The company is experiencing some supply chain challenges, particularly with smaller items, which could affect turnover.
- Despite strong margins, the company maintains a conservative gross margin guidance of 42% for FY25, indicating potential pressure on profitability.
Q & A Highlights
Q: Can you provide details on the order inflows and working capital situation for the first half of FY25?
A: We have achieved an order book of INR7,500 crore in the first half and are confident of reaching our target guidance of INR25,000 crore for FY25. Major expected orders include a 3D radar (INR2,500 crore), electronic warfare for MI17 (INR2,000 crore), and ATULYA order (INR2,000 crore). The current ratio is 1.6, and we do not foresee challenges in working capital management. Operating cash flow is negative due to increased inventory for the second half, which is expected to normalize by year-end.
Q: What are the major projects to be executed in the next two quarters?
A: Key projects include LRM (INR1,600 crore), Shakthi EW project (INR800-900 crore), instrumented EW range (INR750 crore), Akash army (INR500 crore), D29 system (INR500 crore), and weapon locating radars (INR450 crore).
Q: Can you explain the reasons for the gross margin expansion in Q2 FY25?
A: The gross margin guidance for FY25 is 42%, but the current half-year margin is 45% due to the product mix. We expect to maintain a 42% gross margin for the full year.
Q: What is the outlook for order intake and growth beyond FY25?
A: We are targeting more than this year's growth guidance for next year. We expect significant orders from programs like QRSAM, which alone could contribute INR25,000-30,000 crore. We are confident of achieving more than 15% revenue growth next year.
Q: How is Bharat Electronics addressing challenges in the supply chain, particularly with Israel-linked components?
A: Major challenges have been streamlined, and we are not facing significant issues. Some small items may affect turnover slightly, but overall, the supply chain is stable.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
