1:10 Split, 3 Bonus, 51 Dividends; BUY Zero Debt Defence PSU Stock BEL, ICICI Securities Sets Rs 350 Target

Bharat Electronics (BEL), a zero debt defence PSU giant, has significantly recovered in the first trading week of December. Currently at Rs 313.70, BEL shares ended the weekly trading session of December 2-6, up by 2.3% on NSE, while its month-on-month performance is up by 4.44%. Now, BEL stock is just a little over Rs 26 from hitting its 52-week high. Brokerage ICICI Securities is the latest to recommend BUY on BEL for a target price of Rs 350, which would be its new high if touched.

BEL Share Price:

After market hours of December 6th, BEL stock ended at Rs 313.70 apiece, with a market cap of Rs 2,29,307.76 crore. The stock is Rs 26.8 away from hitting its 52-week high of Rs 340.50, while it is trading more than double the 52-week low of Rs 151.85 apiece.

YTD, BEL stock rallied by 69.61% on NSE, while in a year, the upside is about 95.63%. In 5 years, BEL stock advanced by 816.72%, making it a multi-bagger. BEL shares all-time gains are a whopping 142,490.91%. Once upon a time, the stock was merely at Rs 0.22 apiece.

As per Trendlyne data, the company's Debt-to-equity ratio is zero, which means it is debt-free. While its Price to price-to-earning ratio is 50.51, lower than its sector PE ratio of 67.86. Additionally, the company's Return on Equity(ROE) for the last financial year was 24.4%, more than 20% in the last financial year, indicating an efficient use of shareholder's capital to generate profit. Moreover, Promoter Share Holding stayed the same in the most recent quarter at 51.14%, while Promoter Pledges were zero.

BEL Share Price Recommendation:

Brokerage ICICI Securities likes BEL stock and believes it is the top beneficiary of the latest approval by DAC for Rs 21,772 crore worth of acquisitions to drive military capabilities.

Its note said, "Among the stocks under coverage, we see BEL likely benefitting the most due to 1) possible award of EWS package for Su-30MKI; 2) trickle-down benefit
of 20-30% of the value of shipbuilding orders; and 3) overhaul of electronic components and FCS of T-72, T-90 and BMPs."

ICICI Securities added that BEL benefit the most due to direct benefit from EWS for Su-30MK-I and share from almost all the other proposals. That being said, ICICI Securities suggests a BUY rating on BEL for a target price of Rs 350.

Earlier this week, DAC granted the Acceptance of Necessity (AoN) for the procurement of 31 New Water Jet Fast Attack Crafts (NWJFACs) for the Indian Navy. These are designed to perform the task of Low-Intensity Maritime Operations, Surveillance, Patrol, and Search and Rescue (SAR) operations close to the coast. In addition, these vessels will play an effective role in Anti-Piracy missions, especially in and around our Island territories. DAC also accorded AoN for procurement of 120 Fast Interceptor Craft (FIC-1). These vessels are capable to perform multiple roles, including escorting High-Value Units such as Aircraft Carriers, Destroyers, and Frigates, Submarines for coastal defence.

Last month, ICICI Direct recommended BUY for a target price of Rs 345 on BEL. This is due to BEL's healthy order backlog, improving execution and robust pipeline provides strong visibility for future earnings growth. This brokerage is expecting revenue & PAT CAGR at ~16% & ~17% respectively over FY24-27E. The balance sheet remains strong with healthy returns ratios.

BEL has a strong track record of bonuses, dividends, and stock splits.

Bonus Issue: BEL has delivered as many as 5 free shares in three tranches. The last bonus shares allotment was of 2:1 ratio in September 2022, while its second bonus issue was of 1:10 ratio in September 2017. The first bonus issue by BEL was 2:1 in September 2015.

Stock Splits: The defence giant has split up only once since listing. The first stock split was of 1:10 ratio in March 2017, where the face value of Rs 10 each was trimmed to Rs 1 each.

Dividends: BEL has delivered at least 51 dividends since August 2001, as per Trendlyne data. In the last 12 months, the dividend was to the tune of Rs 2.20 per share. Its current dividend yield is at 0.72%.