Target: ₹2,350
CMP: ₹2,455.90
BEML management expects revenue to grow by 20 per cent y-o-y in FY24 to ₹4,500-4,800 crore (earlier ₹5,000 crore), driven by execution ramp-up in defence & aerospace (D&A) and rail & metro ([R&M]; both segments set to post a 30-40 per cent CAGR over FY24-26) while mining & construction (M&C) could grow at a 5-8 per cent CAGR.
It also aims to improve mix in FY24 to 45:55 in M&C and R&M & defence, respectively, from 50:50 in FY23.
We raise our EPS by 10 per cent in FY24, 19 per cent by FY25 and 15 per cent in FY26 based on improved mix, staff cost containment and better execution amid improving pipeline and expansion program. Accordingly, we raise our TP by 17 per cent to ₹2,350 on 25x (unchanged) September 2023 P/E. The current orderbook at ₹12,700 crore provides revenue visibility for the next three years, led by: execution of the Mumbai & Bengaluru Metro and defence orders over FY24-26; strong inflow pipeline in rail, metro & defence, due to indigenisation focus; and incremental orders for mining equipment in the coal segment.
These bode well for growth prospects. We reiterate Reduce as the stock outperformed by 50 per cent over the past six months.