Fundamental Analysis of BEML Ltd: A Rising Midcap PSU with Promising Growth Potential

BEML Ltd (formerly Bharat Earth Movers Limited) is a major public sector undertaking (PSU) under the Ministry of Defence, contributing to India’s heavy industries, mining, and defense sectors. With a solid market cap of ₹15,496 crore, the company has established itself as a leading player in the mining and construction equipment, defense vehicles, and railway coaches segments. Over the years, BEML has not only cemented its legacy in India but has also made its mark internationally by exporting its equipment to over 71 countries.

Currently trading at ₹3,722 per share with a PE ratio of 54.1, BEML is one of the key players in the midcap PSU sector, showing potential for both short-term and long-term growth. This article will provide an in-depth fundamental analysis of BEML, highlighting its business strengths, financial performance, and growth opportunities for investors looking to capitalize on a rising midcap PSU.

BEML Ltd: An Overview of its Operations

Diversified Business Segments

BEML operates in three core segments:

1. Mining and Construction Equipment: Contributing to almost 50% of its revenues, BEML is a market leader in India for earthmoving machinery. The company manufactures a range of products, including bulldozers, hydraulic excavators, wheel loaders, and dump trucks, critical for sectors like coal mining, steel, cement, and infrastructure development.
2. Railway and Metro Coaches: BEML supplies rolling stock to Indian Railways and metros across India, generating 27% of its revenue. It has delivered more than 1,100 metro coaches to multiple Indian cities, making it a vital player in India’s growing urban infrastructure.
3. Defense Equipment: A significant part of BEML’s portfolio is dedicated to defense, where it supplies armored vehicles, recovery vehicles, and all-terrain defense vehicles to the Indian Army, Navy, and Air Force. This segment generates around 23% of the company’s revenues.

BEML’s International Presence

The company has expanded its operations globally by exporting mining and construction equipment to 71 countries, with 347 units exported in FY24 alone. The company’s ability to tap into international markets provides a strong foundation for future growth.

Financial Analysis of BEML Ltd

First, take a glance at the balance sheet dashboard of the company and let’s understand step-by-step

Sales, Net Profit & Operating Profit:

The graph in the provided image showcases BEML’s financial performance over recent years. BEML has demonstrated consistent growth, with sales increasing from ₹3,239 crore in March 2018 to ₹4,054 crore in March 2024, with a further predicted rise to ₹4,358 crore by March 2025.

Net Profit has shown notable growth, from ₹130 crore in March 2018 to ₹282 crore in March 2024, and is expected to reach ₹303.15 crore by March 2025. This growth is supported by improved operating profit, which rose from ₹253 crore in March 2018 to a predicted ₹544 crore in March 2025.

Operating Profit Margin (OPM)

BEML’s operating profit margins have steadily improved, increasing from 7.81% in March 2018 to 10.98% in March 2024, with a prediction of reaching 12.50% by March 2025. This steady rise is a clear indicator of BEML’s operational efficiency and ability to manage costs while expanding its revenue base.

Earning Per Share (EPS)

The company’s Earning Per Share (EPS) has grown significantly from ₹31.17 in March 2018 to ₹67.74 in March 2024, with a projection of ₹72.82 by March 2025. This EPS growth reflects the company’s strong profitability and efficiency in generating earnings for its shareholders.

Return on Equity (ROE)

BEML’s ROE has improved consistently, rising from 5.91% in March 2018 to 10.57% in March 2024. The predicted ROE for March 2025 is 10.89%, signaling healthy returns for investors based on the company’s equity base.

Asset and Liability Distribution

From the pie charts, we see BEML’s asset and liability structure:

• Assets: Major assets include other assets worth ₹5,026 crore, while investments, CWIP (Capital Work In Progress), and fixed assets are at relatively smaller values.

• Liabilities: BEML’s liability structure shows other liabilities of ₹2,852 crore, with reserves amounting to ₹2,626 crore. This strong reserve base enhances BEML’s ability to invest in future projects and manage its financial health.

Stock Target and Recommendations

As on 16/10/2024 the stock is trading at Rs 3,722

Short-term Outlook (3 months):

• Target Price: ₹4,100
• Stop Loss: ₹3,500

Long-term Outlook (12 months):

• Target Price: ₹4,500
• Stop Loss: ₹3,200

Given BEML’s strong fundamentals, ongoing government projects in infrastructure and defense, and its solid position in metro and railway coach manufacturing, the company holds a promising outlook for both short-term and long-term investors.

FAQs

Conclusion

BEML Ltd stands out as a rising midcap PSU with significant growth potential in the mining, defense, and railways sectors. The company’s consistent financial performance, expanding international presence, and robust future projections make it an attractive investment opportunity. With a well-diversified business portfolio, improving profitability, and a strong order book, BEML is well-positioned to capture opportunities in India’s growing infrastructure and defense sectors.

For investors looking for a solid midcap PSU with long-term growth prospects, BEML’s fundamentals make it a stock worth considering. Keep an eye on the targets and market trends, as BEML is poised to deliver steady returns in both the short and long term.

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