Higher growth expectations from Engineering & Project Business: BEL is closing old continuing projects which are unviable, have time and budget overrun. BEL is being very selective about new projects as stabilization to turnaround E&P segment, which will enhance the overall financial performance of the company. E&P business reported revenues of INR 1150 crore in FY14 and expected to register revenues of INR 1500 crore in FY15.
Consistent growth in Consumer Durable segment: BEL is a dominant consumer durable player and enjoys leadership in small appliances segment in India with consistence growth in all the sub-segments.
International tie-ups of the company: BEL has distribution arrangements with various international companies for better products in premium segment.
Focus on exports and rural markets: BEL is planning to increase its revenues from exports by increasing overseas sales and entering new markets. The company is also expanding its reach in rural areas by planning more stores for increase in sales volume for electrical appliances and utility products.
Setting of R&D centers: BEL is planning to set up dedicated research and development centre for innovation and new product development.
We value BEL based on DCF methodology. Based on WACC of 11.90% and assumed terminal growth rate of 3% and the company’s future free cash flows, we arrived at a target price of INR405 for the stock. Our target price reflects an upside potential of 20% from BEL’s CMP of INR337 per share.