BEML LTD

Company Overview BUY MAINTAIN- ₹4200* MARKET DATA as on 15-03-2024

* 4200
INDUSTRY ENGINEERING
BEML Limited, formerly Bharat Earth Movers Limited, is a public sector
undertaking that manufactures heavy equipment for the defence, earth Nifty 22023.35
moving, and infrastructure sectors. It is India's second-largest manufacturer of NSE code BEML
earth moving equipment and has a diverse business portfolio that serves BSE code 500048
India's core sectors like Defence, rail, power, mining, and infrastructure. BEML CMP (INR) 2802
was incorporated on May 11, 1964. Market cap (cr) 12871
BEML's vision is to improve competitiveness through collaboration, strategic 52 week range 4144/1184
alliances, and joint ventures. It also aims to grow profitably by pursuing Face value 10
business opportunities in domestic and international markets, adopt state-of-
the-art technologies, and bring in new products through Transfer of
Technology and in-house R&D.
STOCK PERFORMANCE
BEML aspires to grow at 20% per annum and aims to double its revenue in
three years
Margins are expected to improve, with the company aiming to reach double
digits in EBITDA
Source: Company Annual Report

Q3 FY-24 Highlights
BEML generated strong 14.94% YoY/Qu revenue growth in the quarter to
`9.2bn on the back of strong order execution. The improved output coupled
with easing material costs lead to a 5% YoY increase in Gross Profits, with
margins jumping 200bps. Strategy to increase employee productivity while
keeping overall costs stagnant continues to work in the company’s favor as YTD
EBITDA margins jump into the black. Large orderbook of `130bn and the strong
order pipeline will keep the wheels churning at BEML for the foreseeable
future.

Shareholding Pattern (Dec 23)

Key financials
Rs. (In lakhs) FY24 Q1 FY24 Q2 FY24 Q3 Promoter 54.03%
Sales 91679 91679 104697 FII 9.12%
YOY growth % -124.42% 239.23% 14.94% DII 18.97%
Public 17.87%
EBITDA -4933 6868 9015
EBITDA margins % -5.38% 7.49% 8.61% Absolute ROE
PAT -7501 5178 4820 5 Year 4%
PAT margins % -12.98% 5.60% 4.46% 3 Year 5%
Operating profit -6498 5293 7437 Last Year 6%
Piotroski F score 8
29.5%
3 CAGR
 BEML LTD

Indian economic overview

India is one of the fastest growing economies of the world and is poised to continue on this GDP growth rate
path, with aspirations to reach high middle-income status by 2047, the centenary of Indian
independence. The growth of the past two decades has also led to India making remarkable
progress in reducing extreme poverty. Between 2011 and 2019, the country is estimated to
have halved the share of the population living in extreme poverty - below $2.15 per person
per day.

After real GDP contracted in FY20/21 due to the COVID-19 pandemic, growth bounced back
strongly in FY21/22, supported by accommodative monetary and fiscal policies and wide
vaccine coverage. Consequently, in 2022, India emerged as one of the fastest growing
economies in the world, despite significant challenges in the global environment – including
renewed disruptions of supply lines following the rise in geopolitical tensions, the synchronized
tightening of global monetary policies, and inflationary pressures. Real GDP growth is likely to
moderate to 6.3 percent in FY23/24 from the estimated 6.9 percent in FY22/23.
Source: World Bank

Source: Trading economics

Industry overview
The defense sector was privatized in 2001 but it did not attract much traction as
PSUs and OFBs were highly favored. To address this issue the GOI recently
introduced various measures like: Excise/customs duty exemptions enjoyed by
DPSUs were discontinued to provide a level playing field to private companies.
Customs duty exemptions on imported equipment were removed.

Budgeted allocation for Indian defense: The Union Budget for FY23-24 allocated a
total budget of Rs 5.9tn, which is 13% of the total budget and the capital allocations
pertaining to modernization and infrastructure development of the defense services
has been increased to Rs 1.6tn representing a rise of Rs 102bn (6.7%) over the
previous FY. Source: IDSA

This, in turn, has fostered domestic manufacturing, leading to a decrease in imports

and supporting the "AATMANIRBHAR BHARAT" (self-reliant India) initiative. As a
result, this has effectively addressed the substantial requirements of the Indian
defense forces.
Previously, India imported more than 60% of its defense requirements which
reduced due to various government initiatives like “Make in India” and
“AATMANIRBHAR Bharat”. The GOI is focusing on increasing indigenous defense
manufacturing to become self-reliant as Rs. 3.5 Tn (USD 47bn) contracts were
awarded between April 2015 and Aug 2020 and an expected Rs. 5.5 Tn (USD 70bn)
contracts are to be awarded within the next 5 years.
Source: Research Report by Angel Broking and Prabhudoss Liladhar
 BEML LTD

Products Manufactured are:

Source: Company Investor Presentation

Source: Company Investor Presentation

 BEML LTD

Income statement (Figures in crores)

Years Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24E Mar-25E Mar-26E
Sales 3474.25 3025.44 3596.83 4337.49 3898.95 4100 4920 5904
Sales growth -13% 19% 21% -10% 5% 20% 20%
Other income 23.23 48.56 19.94 5.68 22.1 25 22 25
Net revenue 3497.48 3074 3616.77 4343.17 3921.05 4125 4942 5929
COGS 1,967.15 1,590.09 2,036.39 2,419.38 2,136.53 2268 2706 3270
COGS % of sales 56.6% 52.6% 56.6% 55.8% 54.8% 55.3% 55.0% 55.4%
Gross profits 1530.33 1483.91 1580.38 1923.789 1784.52 1857 2214 2659
Gross profit margins 44.0% 49.0% 43.9% 44.4% 45.8% 45.3% 45.0% 45.0%
Employee cost 805.75 848.07 851.95 861.46 839.76 850.00 900.00 1,000.00
% of sales 23.2% 28.0% 23.7% 19.9% 21.5% 20.7% 18.3% 16.9%
Selling & other expenses 463.81 503.36 528.81 746.81 558.21 600.00 700.00 800.00
% of sales 13.3% 16.6% 14.7% 17.2% 14.3% 14.6% 14.2% 13.6%
EBITDA 260.77 132.48 199.62 315.518 386.55 407.00 614.00 859.00
EBITDA margins 7.5% 4.4% 5.5% 7.3% 9.9% 9.9% 12.5% 14.5%
D&A 70.73 72.38 71.38 66.45 64.08 90 100 110
D&A % of sales 2.04% 2.39% 1.98% 1.53% 1.64% 2.20% 2.03% 1.86%
Interest 59.61 40.74 39.4 49.334 49.25 50 55 60
Interest % of sales 1.72% 1.35% 1.10% 1.14% 1.26% 1.22% 1.12% 1.02%
PBT 130.43 19.36 88.84 199.734 273.22 267.00 459.00 689.00
Tax 67.29 -44.32 18.41 71.148 119.82 74.76 128.52 192.92
PAT 63.14 63.68 70.43 128.586 153.401 192.24 330.48 496.08

Balance sheet (Figures in crores)

Years Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Equity Share Capital 41.77 41.77 41.77 41.77 41.77
Reserves 2145.6 2211 2172.64 2314.92 2379.71
Borrowings 403.62 341.1 751.72 831.81 381.48
Other Liabilities 2494.99 2569.58 2876.84 2624.49 2303.94
Total liabilities 5085.98 5163.45 5842.97 5812.99 5106.9
Fixed assets 631 621 601 621 548
Capital Work in Progress 25 15 14 14 23
Investments 0 0 0 0 0
Other Assets 4430 4527 5228 5178 4536
Total non - current assets 5086 5163 5843 5813 5107
Trade Receivables 1614 1508 1885 1861 1237
Inventories 1783 2102 2084 2177 2159
Cash equivalents 31 28 5 34 39
Short term loans 12 4 4 4 4
Other asset items 989 885 1250 1102 1097
Total current assets 4429 66.11 74.98 159.95 159.53
Total assets 5086 5163 5843 5813 5107
Source: Screener
BEML LTD

Key ratios
Years Mar-22 Mar-23 Mar-24E
Sales Growth 20.59% -10.11% -1.59%
EBITDA Growth 31.1% 36.3% -
EBIT Growth 94% 29% -
Net Profit Growth 2.97% 4.05% -

Profitability ratios
Gross Margin 47.63% 44.49% 52.38%
EBITDA Margin 7.27% 9.95% 7.49%
Net Profit Margin 2.96% 4.03% 5.60%

Return on Capital Employed 9.9% 13.8% -

Return on assets 2.25% 3.15% -
Return on Equity 5.46% 6.52% -

Efficiency ratios
Inventory Turnover Ratio 1.12% 1.02% -
Asset Turnover Ratio 0.76 0.73 -

Debtor Days 157 116 -

Days Payable 85 116 -
Inventory Days 328 369 -
Cash Conversion Cycle 400 369 -

Liquidity ratio
Current ratio 2.38 2.39 -
Quick ratio 1.23 1.37 -
Cash ratio 1.90% 1.94% -

Solvency ratio
Debt to equity ratio 35.33% 15.75% -
Financial leverage 1.70 1.90 -
Interest coverage ratio 6.82 8.39 -

Valuation ratio
PE ratio 37.98 40.72 73.33
P/B ratio 2.48 2.22 5.68
P/Sales ratio 1.54 1.21 3.14
EV/EBITDA 15.46 16.60 32.26
BEML LTD
Management Team
Key person Designation Details
Shri Shantanu Roy Chairman and Managing He is a graduate in Electrical Engineering from NIT Raipur and an MBA
director
in Financial Management. He is having more than 30 years of extensive
experience in the capital goods sectors for Defense, Mining &
Construction, Transportation, Transmission, Renewable and large
power projects.

Shri Ajit Kumar Director He is a graduate in Mechanical Engineering from IIT Kharagpur in 1987.
Srivastav (Defence Business) He joined BEML as an Engineer Trainee and in his professional career
spanning over three decades in BEML, he has worked in various critical
functions in the Company. He assumed charge as Director (Defense
Business) of the Company on 01.06.2020. Prior to assuming the charge
as Director, he served as Chief General Manager (Defense Marketing).
He played a significant role in phased indigenization of key products
and import substitution.

Shri Anil Jerath Director (Finance) He is a Cost & Management Accountant from the Institute of Cost
Accountants of India. He has rich & varied experience of 33 years in
Government, Public & Private Sectors with wide exposure in all
aspects of Accounting & Financial management, Accounts Finalization
and Audit, Tax Planning and Tax Management, analyzing the financial
viability of new ventures / new projects and forecast the amount of
project finance / fund requirement, conceptualizing and
implementing financial procedures including working capital
management, internal financial controls and target costing.

He is qualified B. Tech and M. Tech and a 1996 batch Indian Forest

Shri Surendra Government Nominee
Service (IFoS) Officer of West Bengal cadre. He has previously
Prasad Yadav Director
worked in Department of Forest, Government of West Bengal, in
different capacities i.e. Divisional Forest Officer and Chief
Conservator of Forest. He also worked as Executive Director in West
Bengal Industrial Development Corporation Limited for more than 7
years. Presently, he is working as Joint Secretary (Land System) in
Department of Defense Production, Ministry of Defense, Govt. of
India.

Source: Company Report

BEML LTD
Details of Remuneration

Source: Company Annual Report

Source: Company Investor Presentation

 BEML LTD

Comparable Company Valuation

MARKET DATA FINANCIALS
SHARE SHARES BOOK ENTERPRISE NET
COMPANY
PRICE OUTSTANDING VALUE NET DEBT VALUE REVENUE INCOME
Hindustan Aeronautics 3170.80 66.90 375 0.37 190673 26928 158
Bharat Dynamics 1686.05 18.30 184 4.49 27093 2489 352
MTAR Technologies 1704.80 3.08 215 249 5479 573 104
Bharat Electronics 198.00 731 20.3 61.40 136203 17734 2986
BE
BEML 3091.05 4.16 569 391 13252 3899 15
158
Paras Defense 649.65 3.90 110 25.4O 2546 214 36

VALUATIONS
EV/REVENUE EV/EBITDA PE
Hindustan Aeronautics 7.08 20.80 34.50
Bharat Dynamics 10.88 37.90 64.80
MTAR Technologies 9.56 35.90 64
Bharat Electronics 7.68 26.70 40.40
BEML 3.39 31.90 70.50
Paras Defense 11.89 44.10 77.30

Shareholding Pattern
Quarters Dec-22 Mar-23 Jun-23 Sep-23 Dec-23
Promoters 54.03% 54.03% 54.03% 54.03% 54.03%
FII 5.50% 5.44% 6.08% 6.79% 9.12%
DII 19.87% 19.72% 19.51% 19.03% 18.97%
Public 20.59% 20.79% 20.38% 20.16% 17.87%
No. Of Shareholders 93,523 94,767 95,039 1,01,576 99,586

Source: Screener

Source: Company Annual Report

BEML LTD
Financial Summary

Return on equity (ROE)

Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Net Profit 6349 6838 7480 13459 15878
Average Shareholder Equity 2,19,445 2,22,019 2,23,352 2,28,528 2,38,870
Return on Equity 2.89% 3.07% 3.34% 5.88% 6.67%

ROE - Dupont Equation

Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Net Profit 6,349 6,838 7,480 13,459 15,878
Revenue 3,48,106 3,02,882 3,55,721 4,33,749 3,89,895
Net Profit Margin (A) 1.82% 2.26% 2.10% 3.10% 4.07%
Revenue 3,48,106 3,02,882 3,55,721 4,33,749 3,89,895
Average Total Asset 4,84,896 5,04,207 5,40,168 5,72,143 5,35,940
Asset Turnover Ratio (B) 1.39X 1.66X 1.51X 1.31X 1.37X
Average Total Asset 4,84,896 5,04,207 5,40,168 5,72,143 5,35,940
Average Shareholder Equity 2,19,445 2,22,019 2,23,352 2,28,528 2,38,870
Equity Multiplier (C) 2.20X 2.27X 2.41X 2.50X 2.24X

Return on Equity (A*B*C) 5.56% 8.51% 7.64% 10.15% 12.49%

Return on Asset
Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Net Profit 6,349 6,838 7,480 13,459 15,878
Average Total Asset 4,84,896 5,04,207 5,40,168 5,72,143 5,35,840
Return on Asset 1.30% 1.35% 1.38% 2.35% 2.96%

ROA - Dupont Equation

Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Net Profit 6,349 6,838 7,480 13,459 15,878
Revenue 3,48,106 3,02,828 3,55,721 4,33,749 3,89,895
Net Profit Margin (A) 1.82% 2.26% 2.10% 3.10% 4.07%
Revenue 3,48,106 3,02,828 3,55,721 4,33,749 3,89,895
Average Total Asset 4,84,896 5,04,207 5,40,168 5,72,143 5,35,940
Asset Turnover Ratio (B) 1.39X 1.66X 1.51X 1.31X 1.37X

Return on Asset (A*B) 2.52% 3.75% 3.17% 4.06% 5.57%

 BEML LTD

SWOT Analysis

Strength – Opportunity –

• The interest coverage ratio has increased from • The company has high degree of operational
6.82 to 8.39 leverage so they can capitalize on that.
• EBITDA margins have increased from 7.27% to
9.95% • Company has low level of debt to equity of
• Net profit margins have increase from 2.96% to just 0.16. They can raise more debt as an
4.03% opportunity to balance their capital structure

Weakness – Threats –

• Sales have decreased by over 10% in the last year • Company has lower ROE of 6.5% and ROCE of
• Gross profit margins have also decreased from 12% which is below the average of industry
47.6% to 46.5% • High price to earning multiple of 70

*We maintain a buy call on BEML LTD after analysis of financials and company’s business.
According to us, we give a buy call of Rs 4200 which can be achieved in one year.

Research Report prepared by:

Aryan Shah (2146)
Utsav (2147)
Nishit (2124)
Manav (2113)
Krish (2160)

Disclaimer: This is an academic project report not meant for commercial use.
The data used is collected from authorized sites and company annual reports. The authors have not independently verified the accuracy of data.
The author of the report is not a SEBI registered analyst. The report is a part of an academic assignment. The information given in a research
report is not a recommendation to buy/sell any financial instrument.