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Buy Bharat Electronics, CAG raises concern on missile systems of co: CITI

According to CAG's audit the missile systems delivered by the company were deficient in quality.

Citi has maintained buy rating on Bharat Electronics with a target of Rs 199. The Comptroller and Auditor General (CAG) of India has raised concern on the missile systems issued by the company to the Indian Air Force (IAF).

According to CAG's audit the missile systems delivered by the company were deficient in quality. A preliminary failure analysis report revealed that the missiles fell short of targets, had lower than required velocity and also there was malfunctioning of critical units like Servo Control Unit and Connector.

Out of 80 missiles received up to November 2014, 20 were test fired during April-November 2014, out of that six (30 percent) had fail the tests. Two missiles failed to take off because the booster nozzle had failed, said CITI.

As per CAG, the missile systems' induction suffered delays due to delay in infrastructure creation and delay in site acceptance test.

The company is currently negotiating with the Indian Air Force for supply of 7 squadrons of Akash. The said concerns could lead to delays in signing of the order. However, the company already has a healthy order book, which should prevent risks to near-term earnings," it added.

The company's standalone Q1 (April-June) net profit increased by 247 percent at Rs 125.3 crore versus Rs 36.1 crore, in a year ago period.

Total revenue of the company rose 94 percent at Rs 1,803.1 crore versus Rs 927.8 crore.

At 10:55 hrs Bharat Electronics was quoting at Rs 181.80, up Rs 2.85, or 1.59 percent on the BSE.

It has touched a 52-week high of Rs 187.40.
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