Bharat Electronics recorded close to 50 per cent of its turnover in the last quarter of the fiscal year. The March-June quarter was the leanest, and sales increased sequentially in the subsequent quarters. Given the impressive performance in the first quarter, one can expect better performance in the next three-four quarters. The order-book size of Rs 6,930 crore, which is close to three times its March 2003 full year sales, indicates future turnover growth.

Bharat Electronics is a public sector undertaking with 75 per cent government holding. It designs and makes electronic and communication equipment for use in Defence applications, broadcasting, opto electronics, solar power systems, IT products and electronic components. The company also develops products for niche applications such as electronic voting machines, integrated fish finder, alarm system for unmanned level-crossing, and global positioning system-based vehicle-tracking system.

Bharat Electronics future prospects depends on:

The company derives close to 70 per cent of its turnover from Defence applications and the rest from civilian applications.

Higher allocation to the Defence sector over the last couple of years has maintained the growth momentum in Bharat Electronics. The Government is unlikely to trim its allocation to the Defence sector given the current political conditions and the need to upgrade Defence services.

Its products for the civilian market such as satellite transponders for ISRO, traffic systems and integrated fish finders have been successful and have good growth potential. ISRO plans to outsource close to 50 per cent of its requirement from private and state-owned engineering companies. Bharat Electronics supplies satellite transponders and would benefit immensely from this move.

Over the past three years, Bharat Electronics' efforts to indigenise raw material requirement has resulted in substantial cost savings. The company spends close to 5 per cent of its turnover on research and development. Staying ahead in technology is an important factor for sustaining growth.

Despite the opening up of Defence contracts to private players, Bharat Electronics enjoys a near-monopoly position as of now due to its technological advantages. Therefore, there are no competitive threats in the near future.

Bharat Electronics' business prospects appear bright in the near-to-medium term and, hence, the stock holds potential for appreciation. Any weakness from the current price in sync with the broad market trend can be used to enhance exposures.

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