Our discussion with the management post Q3 results indicates that order book is up 29% sequentially to Rs164bn. Management also indicated they are on track to beat FY11 MoU guidance. BEL remains the best play on the India defence capex. We maintain our Buy rating.

Not much to make out of Q3; FY numbers are Q4 heavy
􀀟 BEL reported Q3 results, which saw revenues up 11% at Rs13.7bn. Operating profits were down 28% on account of increase in employee cost and a sharp increase in purchase of traded goods( due to the order execution mix during the quarter). PAT was down 24%yoy at Rs1.7bn.

􀀟 However, historically, 4Q has been the strongest quarter for the company. We expect FY11 will be similar to past years, where on average 51% of revenues and 59% of PAT flow through in the fourth quarter.

Order book up 29%qoq; On track to meet FY11 MoU guidance
􀀟 Our discussion with the management post results indicated that the current order book stands at Rs164bn, which is a sequential growth of 29% as compared to Rs127bn at the end of the September quarter

􀀟 The company won the Akash order of Rs36bn during the quarter. The company is looking at a order pipeline of Rs40bn in the current quarter

􀀟 Based on our discussion with management, we believe BEL is on track to meet its FY11 revenue MoU target of Rs57bn. The company is also targeting a PBT margin

of 19-20% for FY11.

Best play on India defence capex; Maintain Buy
􀀟 We forecast revenue of Rs71.3bn for FY13, implying an 11% CAGR and in line with the company's growth rate of the past decade. We e expect employee costs to moderate and because the bulk of its wage revision has already been completed leading to a profit CAGR of 20% over FY10-13.

􀀟 We believe BEL offers the best play the Indian defence capex story and maintain our Buy rating. Stock trades at 14xFY12F.