1:10 Split, 3 Bonuses, Rs 94.35/Dividends In 10 Yrs: Zero Debt Defence PSU Stock BEL Dips 9% In 5 Days; BUY?

Debt-free defence PSU stock, Bharat Electronics (BEL) has slipped sharply by 9% in the trading week from July 15-19 on both BSE and NSE. This Modi stock which has been outperforming indices since last year, witnessed correction just before the onset of the Budget 2024 session.Defence capex is one of the key factors that will be looked at during FM Nirmala Sitharamans full-fledged Budget FY25 speech on July 23. The budget 2024 session will begin on July 22, and end on August 12. Accordingly, defence stocks like BEL will be the focus. nbsp;In the interim Budget before the Lok Sabha election 2024, the government allocated a defence budget of Rs 6.2 lakh crore, which was up by 4.3% from the previous years allocation of Rs 5.94 lakh crore.Before Modi 3.0, defence PSU BEL has transformed extraordinarily with rewards of bonus issues, stock splits and dividends. Not only that BEL also has a strong order book and robust pipeline execution, making its share price an attractive bet still.However, BELs share price witnessed a sharp correction along with its other defence counterparts last week. In the trading week that ended on July 19, BEL was down by steeply 9% and is now a little over the Rs 300 mark.Earlier, this month, BEL stock price touched a new 52-week high of Rs 340.50 apiece on NSE, and Rs 340.35 apiece on BSE, over the optimism in Budget. Then why did suddenly defence stocks tumble?There could be two reasons for this. Firstly, as per Nirmal Bangs note, the exuberance around the Defence sector has been built solely around strong order books for assigning high valuations. Hence, the brokerage believes that the conventional financial metrics do not fully capture the industrys true value such as cyclicality, profitability and efficiency.Despite being positive on the sector, and assuming strong earnings growth ahead, Nirmal Bang said, it is unable to justify the exorbitant multiples as the Return on Equity (RoE) of defence stocks under its coverage remains between 10% to 30% for fiscal year 2026.Thereby, Nirmal Bang has downgraded its stance on the Defence sector to SELL, until the stocks valuations to reasonability.Another factor will be outside India, which could play a role in dampening sentiments for rising defence stocks altogether. And this would be the upcoming US elections.Chris Wood of Jefferies during his speech at the CNBC-TV18 Market Townhall exclusively, shed light on the change in political order. As per him, if presidential candidate Donald Trump is voted back to power in 2024, the chances of resolutions between Russia and Ukraine are high, and this could lead to a correction in defence stocks.With two large-scale all-out wars, namely Russia-Ukraine since February 2022 and Israel-Hamas since October 2023, demand for defence equipment has been high and that has stirred bull rallies in them over the years. The stakes are high in the Indian defence sector as well with the aim of Rs 3 lakh crore production by 2028-29, and double the size of exports of Rs 50,000 crore. In FY24, the defence sector in India reached an export of Rs 21,083 crore, which was an all-time high.So should you buy or book profits in BEL stock?As per Trendlyne data, the consensus recommendation from 26 analysts for Bharat Electronics Ltd. is BUY. However, the target price has been reduced substantially. The 1-year average target price is Rs 300.39 apiece, hinting at a nearly 2% potential downside in the short term.However, Nirmal Bang, the latest to downgrade their stance in defence stocks, has set a target price of Rs 256 on BEL from earlier Rs 328. Also, ICICI Direct has suggested adding BEL stock but the target price is at Rs 300. In the long term, the target price for BEL is around Rs 400 per share.BEL Corporate Actions:In 10 years, BEL has carried one stock split, delivered 3 bonus issues, and paid hefty dividends.Coming to dividends, BEL has delivered cumulatively Rs 94.35 dividend per share since January 2014. Earlier in February and March 2024, BEL turned ex-dividend for interim dividends of Rs 0.70 per share each for FY24.BEL is also set to pay a Final Dividend of Rs.0.80 per Equity share (having a face value of Rs.1/- each) for FY24. The record date for the final dividend is likely to be announced soon.Apart from being a top dividend-paying defence stock, BEL also has carried only one stock split so far. It was in 2017, when 1 BEL share split into ten smaller shares effective from March 16. The face value split from Rs 10 to Rs 1.Also, BEL has paid three bonuses to its shareholders since 2015, in total it distributed 5 bonuses. The first bonus reward of a 2:1 ratio in September 2015, followed by 1:10 and 2:1 bonus issues in September 2017 and 2022 respectively.Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.