205% Dividend Payout: This Multibagger Defence PSU Stock Soars 9% On Order Win Worth Rs 250 Crore

Shares of BEML surged by 9% to Rs 4,036 per share on the NSE following the announcement of a significant order worth Rs 250 crore from Northern Coal Fields Limited for dump trucks. The company's order book as of April 1, 2024, stood at Rs 11,872 crore, marking an increase of 38.5% from the previous year.

The company has been on a winning streak, backed by a slew of orders including a the one from the Bangalore Metro Rail Corporation (BMRC) valued at Rs 3,177 crore. This order alone translates to nearly three years of business considering the turnover of FY23.

The surge in BEML's stock price, which has seen a 26% increase in the past six trading days, can also be attributed to its performance in the March 2024 quarter. The company reported a 62.85% year-on-year growth in consolidated profit after tax (PAT), reaching Rs 256.80 crore compared to Rs 157.69 crore in Q4FY23.

Revenue from operations also saw a healthy uptick, growing by 9% year-on-year to reach Rs 1,513.65 crore. The earnings before interest, taxes, depreciation, and amortization (EBITDA) witnessed a growth of 29.1% year-on-year, reaching Rs 370 crore. This growth was further bolstered by an increase in EBITDA margin, which expanded by 381 basis points to 24.5%, aided by gross margin expansion and reduced employee costs.

BEML, a 'Schedule-A' Company, operates in core sectors including defence, rail, power, mining, and infrastructure. With the Government of India owning 54% of total equity, BEML plays a crucial role in serving major government organizations and PSUs such as Coal India Limited and the Ministry of Defence. The company's client base and strong track record have led to repeat orders, particularly in the rail and metro sector.

Looking ahead, analysts are optimistic about BEML's prospects, especially considering the government's push for indigenization through initiatives like "Make in India." The company is expected to benefit from additional orders as government budgets are approved, typically around August or September.

Analysts at Prabhudas Lilladher underscore the company's favourable outlook, citing strong order prospects in the modernization of defence vehicles, burgeoning tender pipeline for metro and Vande Bharat rolling stock, and a promising uptick in margins driven by efficient execution.

While BEML's stock currently trades above Prabhudas Lilladher's target price of Rs 4,004 per share, the company's future seems promising, fueled by a substantial opportunity pipeline in the Rail and Metro sectors. Despite softer-than-expected order inflows in FY24, BEML stands to capitalize on opportunities worth approximately Rs 58,000 crore in FY25, with the Rail sector accounting for around Rs 44,400 crore and Metro projects adding around Rs 14,000 crore.

The company's defence order pipeline is expected to stand at approximately Rs 40,000 crore over the next 4-5 years. This pipeline includes a diverse range of projects spanning high-mobility vehicles (HMVs), armoured recovery vehicles (ARVs), combat engineering equipment, tank engines, and more, with anticipated orders of around Rs 6,000 crore in FY25 and Rs 6,000-9,000 crore in FY26.

BEML shares were seen trading up nearly 8% at Rs 3,987.65 per share on the National Stock Exchange (NSE) as of midday. This stock has delivered multibagger returns of over 175% in the past year alone and a 300% surge over the last three years.

BEML recently declared an equity dividend of 205.00% for the year ending March 2024, amounting to Rs 20.5 per share. With a current share price of Rs 3,988.90, this translates to a dividend yield of 0.51%. The company has a strong dividend track record, consistently declaring dividends for the past five years.