BEL: Top Dividend Paying Defence Stock Suggested To Buy On Strong Orders Intake; Sharekhan Sets Rs 210 TP

Aerospace and defence stock, Bharat Electronics (BEL) has continued to shine even in the last few days of 2023. The latest new 52-week high by this giant would be on December 26th at a staggering Rs 184.50 apiece. The stock is moving closer to the Rs 200 mark and the possibility of this happening is high because of its higher order intake that will drive its sustained growth in the long-term. The latest to recommend buying in BEL which is also the top dividend yield stock of 2023, would be leading brokerage Sharekhan.

On December 26th, BEL touched a new 52-week high of Rs 184.50 apiece before ending at Rs 181.95 apiece, up by 4.06% on BSE. Its market cap was at Rs 1.33 lakh crore.

The strong rally could be attributed to a contract that BEL received for a value of up to Rs 445 crore from the UP Government for the next generation UP Dial 112 project. BEL will be providing comprehensive and state-of-art hardware, AI-based software tools and Cyber Security solutions for the Dial 112 project, which is spread across the entire state of Uttar Pradesh.

Apart from this, the company informed that it received additional orders worth Rs 233 crore since December 22, and these new deals pertain to Communication Display Units, Thermal Imaging cameras and other miscellaneous spares & services.

That being said, BEL has cumulatively received orders worth Rs 26,613 crore in the current financial year 2023-24.

As per Trendlyne data, BEL is the top dividend yield stock in the defence basket with a 1-year trailing yield of 0.99% for dividend payout up to 180% or Rs 1.8 per share in 2023. This dividend yield is higher from its 2-year trailing mark of 0.91% and 5-year trailing level of 0.74%.

In its research note, Sharekhan said that: BEL has already exceeded FY2024 order intake guidance and its future order pipeline is promising as large orders like QRSAM or MRSAM are expected to be
awarded over the next few quarters.

At the end of Q2FY24, the company's order backlog stood at Rs 68,728 crore (~3.8x TTM revenue), the brokerage pointed out.

Sharekhan expects significant growth in the company's order book as the government recently cleared the procurement of defence equipment worth ~Rs. 2.23 lakh crore. BEL has continued to maintain its growth momentum by building on its core strength and delivering defence equipment like missile systems and radar systems.

In the medium term, the brokerage expects the company to receive large orders related to QRSAM, MRSAM, Integrated Air Command and Control System (IACCS), and Drones. Also, new non-defence products like the Air Traffic Management Automation System and growth in exports will help the company diversify its revenue along with increasing the size of the total addressable market (TAM).

Furthermore, BEL has developed partnerships with design agencies, academia, start-ups, and global OEMs to maintain its leadership in the defence electronics space.

According to Sharekhan, BEL would play a significant role in successfully implementing the government's Make in India and AtmaNirbhar Bharat initiatives, as it is a key defence and aerospace player. Further, global defence companies are tying up with indigenous players, as there is a tremendous export potential for engineering services and components sourcing from India, which bodes well for BEL. Notably, BEL has a strong manufacturing and R&D base, a robust order book, healthy order prospects, diversifying revenue stream, and a strong balance sheet with improving return ratios.

Hence, Sharekhan said, "We retain our Buy rating on the stock with a revised price target (PT) of Rs. 210." From the current market price level, this would imply a potential upside of 15.41% ahead.

BEL's monthly upside is nearly 29% on BSE, while its six-monthly gains are nearly 54% as of now. Year-to-date, the stock zoomed about 81.50%.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or 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.