Bharat Dynamics Limited (BDL) is a key force in the Indian military sector, dedicated to national security. It has grown into a leading defence technology corporation specializing in designing, developing, and manufacturing complex missile systems and strategic defence solutions.
While the company experienced a decline in revenue and net profit during FY23, a contrasting narrative emerges when considering its recent substantial orders, upcoming strategies, and an impressive stock return of 556.17% over the past five years.
This article goes into the many elements of Bharat Dynamics Limited, including the business overview, the company’s recent developments, its order book, and its future outlook.
Bharat Dynamics Limited
Business Overview
Bharat Dynamics Limited (BDL) is a dynamic force in the Indian military sector, founded in 1970 with the primary goal of researching and manufacturing missile systems and defence technology. BDL, which operates under the Ministry of Defence of the Government of India, has grown into a critical partner in strengthening the country’s defence capabilities.
The company is the sole manufacturer of Missiles and Torpedoes and also a Weapon System integrator for the Armed Forces
Core business activities
The core business activities of BDL encompass the entire lifecycle of missile systems, from design and development to production, testing, and maintenance. The company’s diverse product portfolio includes surface-to-air missiles, anti-tank guided missiles, underwater weapons, Ground equipment, Launchers, and strategic defence solutions
Order book and recent big orders
The company’s order book as of the second quarter of FY24 stands at Rs 20,766 crores as compared to Rs 20,054 crores in FY23, an addition of Rs 1,659 crores in six months.
Let’s go through some of the recent big orders received by the company, During Aero India 2023, an air show and aviation exhibition, BDL showcased its largest-ever product display in Bengaluru. On the day of the exhibition, the company entered into ten Memorandum of Understanding (MoU) agreements with both Indian and foreign companies, expanding its global footprint.
On September 19, 2023, BDL signed an agreement with the Indian Air Force (IAF) for the supply of surface-to-air missiles, valued at Rs. 290.90 crore.
On March 30, 2023, BDL received a substantial order worth Rs. 8161 Crore for Akash Weapon Systems, designated for the 3rd and 4th Regiments of the Army. Additionally, BDL secured another order worth Rs. 261 Crore for Counter Measure Dispensing Systems (CMDS) intended for Multi-Role Helicopters (MLH).
BDL received a supply order valued at Rs. 750 Crore for Anti-Tank Guided Missiles (ATGM) from the Indian Army. The company also has a supply order for Long Range Bomb (LBRM) worth approximately Rs. 254 Crore and another order for Ultra-Light Howitzer (ULPGM) valued at about Rs. 105 Crore.
With these recent big orders, the company showcases positive revenue growth in the upcoming years. Before looking more into the factors contributing to the company’s growth, let’s quickly have a financial walkthrough of the company.
Bharat Dynamics Limited – Financials
The company reported a net revenue of Rs 2489.39 crores in FY23, a decline of 11.64% as compared to the revenue being Rs 2817.40 crores in the previous year. The profit after tax amounted to Rs 352 Crore, from Rs 500 Crore in FY22.
As per the company’s reports, the reason for the declined revenues and profit was delays in obtaining crucial electronic components and explosive materials from Foreign Original Equipment Manufacturers (OEM) which resulted in non-completion of scheduled production. Despite these challenges, the company anticipates a recovery from this revenue shortfall in the ongoing financial year 2023-24.
The company reported an EBITDA margin of 16.40% in FY23, a decrease from 25.77% in FY22. This decrease in margin was mainly because of a decline in manufacturing activities and changes in the product mix.
The ROE of the company also saw a decline of 36% YoY from 17.49% in FY22 to 11.28% in FY23. The main reason was the lower turnover on account of supply chain disruptions and changes in product mix. The company’s debt-to-equity ratio is zero as the company has no debt signifying a strong financial position of the company.
Although the company’s current financials saw a downfall as compared to the previous year, investors have shown interest in the company’s stock, resulting in a return of 556.17% in 5 years and an 85.98% return in one year. Let’s look at the reasons for the growth in the company’s stock
Bharat Dynamics Limited – Important Factors
Government Initiatives and Defence Budget:
With the Indian government allocating 2.15% of the total GDP to the defence budget, and prioritizing the Defence and Aerospace sector under the ‘Atmanirbhar Bharat’ initiative, BDL has found ample growth opportunities. The government’s push for self-reliance in defence manufacturing and approval for export to Friendly Foreign Countries (FFCs) has created a favourable environment for BDL.
Positive Industry Trends
The rise in defence stocks within the defence industry has contributed to the overall positive sentiment around companies like BDL. As the government encourages private sector participation in defence contracts, the company is enhancing its R&D efforts to develop innovative solutions, thereby positioning itself as a key player in the competitive landscape.
Receipt of recent big orders
With the receipt of recent big orders, the company’s order book indicates a steady stream of future revenues and business activities, instilling confidence in investors and analysts alike.
Indigenization Initiatives
BDL’s commitment to indigenizing technology aligns with the government’s self-reliance goals. The company focuses on indigenizing technology from the outset of any contract, achieving high levels of indigenization, particularly in products designed by Foreign OEMs and those by DRDO. This self-reliance strategy positions BDL well in the market.
Export Opportunities
BDL has already received export orders from friendly countries, with an export order book position of Rs Rs 2,586 Crore as of April 1, 2023. This signifies BDL’s success in expanding its customer base in the international market. With adequate production facilities, BDL is well-positioned to meet both domestic and export demands for its products.
Overall, BDL’s order book. strategic focus on indigenization, and export opportunities, combined with the positive government initiatives in the defence sector, has likely played a crucial role in the company’s stock growth.
Bharat Dynamics Limited: Future Plans
Bharat Dynamics Limited (BDL) envisions a substantial expansion of its order book, targeting an additional order inflow of around Rs 25,000 crores over the next 2 to 3 years. The company’s persistent focus on exporting its products is evident as it actively converts leads into confirmed orders from friendly foreign countries.
Bharat Dynamics Limited (BDL) has set an objective for the fiscal year 2024, with a target to achieve a revenue of Rs.3,200 Crore. The company envisions achieving an EBITDA margin ranging between 20% and 23%, emphasizing a balance between profitability and operational efficiency.
In its commitment to innovation, BDL plans to allocate 2% to 4% of sales for Research and Development (R&D) investment, a range reflecting its dedication to technological advancement). Additionally, the company plans a CAPEX of Rs 100 crores, demonstrating strategic investments in infrastructure and development projects.
Aligned with the government’s emphasis on self-reliance, BDL has made significant strides, establishing facilities for Warhead and Seeker manufacturing. Ongoing construction in the UP-Defence Corridor underscores BDL’s commitment to indigenization, aiming to produce GRAD Rockets and propellants for advanced ATGMs.
Partnerships with DRDO for technology transfer and Licensing Agreements for Ceramic Radomes manufacturing showcase BDL’s dedication to innovation. The company is on track to secure Green Channel certification, with an initial certification already obtained, demonstrating its commitment to quality assurance. With a robust order book, increasing international demand, and a focus on technological advancements, BDL is poised to emerge as a global leader in missile and weapon system manufacturing in the coming years.
Conclusion
Bharat Dynamics Limited (BDL) holds a prominent position in India’s defence technology, making substantial contributions to national security. Despite facing challenges in FY23, the company has strategically navigated through them, securing notable orders and maintaining a robust order book for a promising future. BDL’s dedication to indigenization, pursuit of export opportunities, and alignment with governmental initiatives highlight its resilience and adaptability.
Financially, despite a downturn in FY23, the company’s stock performance attests to investor confidence, driven by positive industry trends and government backing. Looking forward, BDL is poised for aggressive expansion, innovation, and a steadfast commitment to self-reliance. Did you find this article insightful? Let us know your thoughts in the comments!
Written by Akshita Maloo
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