140% Dividend: Defence PSU Up 23% In 1 Month; Buy For Highest Target Rs 280, 4 Brokerages Recommend Buy

Bharat Electronics (BEL) is a darling of investors as its share price has surged by more than 26% year-to-date (YTD), while hitting a new all-time high of Rs 235.20 apiece on April 12. But BEL is a smoking hot stock due to its strong fundamentals and robust order. The target price for BEL shares has just gotten higher with brokerage Macquarie being the latest to like the stock.

Macquarie has initiated coverage on BEL. The global brokerage has given an 'Outperform' rating, while the target price is set at Rs 280 apiece. This would be around a 20% potential upside in BEL shares ahead of the current levels.

After market hours of April 12, BEL stock ended at Rs 233.45 apiece, up by 2.03% with a market cap of Rs 1,70,646.79 crore. The stock touched a new 52-week high of Rs 235.20 apiece in the trading hours of that day. BEL is the top-performing defence stock.

In the trading week that ended on April 12, BEL shares were up by 6%. In a month, the stock rallied by 23%, while its year-to-date performance is of gains of 26.2%. In six months, BEL shares are up by 70%, while in a year, the stock zoomed by 131%. BEL's 5-year performance is up by a breathtaking 695%.

Not just that BEL is currently up by 135.5% from its 52-week low of Rs 99.12 apiece.

The reason why brokerages like BEL share is that its business has a strong pipeline of orders and executions. Macquarie believes BEL stands out amidst execution risks in product-focused companies. Macquarie has set the highest target on BEL so far.

Macquarie's outlook comes days after another global brokerage Jefferies recommended a buy on BEL.

Jefferies expects a 2x times growth in domestic defence spending from FY24 to FY30, which will drive these defence players' stock prices. On BEL, Jefferies believes the company is well-placed to benefit from opportunities in the Indian defence segment, as its 70-75% revenue is shored up from the navy and army deals followed by air-force orders. Also, BEL is extra favourable due to its zero-debt and healthy working capital position.

Also, Anand Rathi is the latest Indian brokerage to recommend on BEL. This brokerage estimates BEL to see strong growth going forward due to many factors such as: 1) Moving towards self-reliance in defence, 2) Robust pipeline and focus of exports by GOI 3) Strong order inflow to drive the revenue growth 4) Healthy profitability and return indicators. Hence, it re-initiated a 'BUY' coverage with a target price of Rs 250.

The nearest target to BEL is Rs 240, which was assigned by ICICI Direct earlier. According to this brokerage, a healthy order backlog with a robust pipeline provides strong earnings visibility, while the company's strategy to diversify into non-defence and focus on increasing exports & services share would aid long-term growth and help de-risk its business.

ICICI Direct expects revenue & PAT to grow at a CAGR of 14.3% & 17.6%, respectively over FY23-26E aided by sustained margins at ~23% for BEL.

BEL has received a positive outlook due to its strong order book. In FY24, the company successfully secured orders worth around Rs. 35000 crore. Among the notable defence orders obtained during the year were Electronic Fuzes, EW Systems, Communication Systems for naval warships, Fire Control Systems, Akash Prime Weapon Systems, Radars, Sonars, Software Defined Radios, Night Vision Devices, Tactical Communication Systems and other projects in Non-defence sector.

Overall, in FY24, BEL registered a turnover of Rs 19,700 crore against the previous year's turnover of Rs 17,333 crore recording a growth of 13.65% YoY.

The company will announce its Q4 results anytime between late April to May month.

BEL is among the elite group of Public Sector Undertakings, which has been conferred the Navratna status. The growth of the company mirrors the advances in defence electronics in India. BEL has achieved many milestones over the years.

Among corporate actions this year, BEL has turned ex-dividend in March and February for a dividend payout of 70% each valuing to Rs 0.70 per share each, totalling 140% or Rs 1.4 per share so far in the current year. As per Trendlyne data, BEL has delivered up to 50 dividends since August 2001. Among other corporate affairs, BEL has also paid 3 bonuses and once carried a stock split for investors.

BEL 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. While BEL has paid three bonuses to its shareholders since 2015. 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 or Greynium Information Technologies. The author, 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.