CLSA Downgrades Bharat Electronics Due to High Valuations
CLSA has downgraded Bharat Electronics from "buy" to "outperform" due to high valuations despite raising its price target to ₹294. Shares of Bharat Electronics dropped 19% but are still up 40% in 2024 and 122% over the past year. CLSA maintained its "outperform" rating for Hindustan Aeronautics with a price target of ₹4,731, even though its shares fell 17% but are up 54% year-to-date and 170% in the last 12 months. Emkay advised shifting investments from PSUs to defensive sectors like FMCG. CLSA expects the new Modi government to advance the 'Make in India' initiative for defence.
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Jun 6, 2024
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CLSA has maintained its "outperform" rating for Hindustan Aeronautics, setting a price target of ₹4,731. However, the brokerage has downgraded Bharat Electronics from "buy" to "outperform," marking one of the first downgrades in the PSU sector following a sharp sell-off triggered by the unexpected Lok Sabha election results. Shares of Bharat Electronics dropped by 19% on Tuesday
In contrast, Emkay recommended investors shift their focus from PSUs to more defensive sectors like FMCG. Despite the downgrade, CLSA increased its price target for Bharat Electronics from ₹207 to ₹294, noting that the high valuations leave little room for execution errors among these companies.
Following Tuesday's decline, Bharat Electronics' shares are trading at a one-year forward P/E ratio of 35.19, which remains above the company's five-year average P/E ratio of 31.6. CLSA anticipates that the new Modi government will implement the defence 'Make in India' initiative and execute the $43 billion worth of Indian-made products approved by the Defence Acquisition Council for FY2024.
CLSA has maintained its "outperform" rating for Hindustan Aeronautics with a price target of ₹4,731. Despite the recent drop, Bharat Electronics' shares are up 40% in 2024 and have surged 122% over the past year. Similarly, Hindustan Aeronautics' shares, which fell 17% on Tuesday, have increased 54% year-to-date and over 170% in the last 12 months.
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