1:10 Split, 3 Bonuses, 1% Yield: Defence PSU Stock To Pay 70% Dividend Rewards Soon: Buy For Rs 235-270 TP

Defence giant PSU stock, Bharat Electronics (BEL) is in focus after it recommended a 70% dividend payout. The record date is fixed for later in the current week, and accordingly, its share price will be in focus. BEL is seen among high-conviction stocks and is recommended to buy for a target price of Rs 235 and even higher of Rs 270. There is a potential upside of over 24% to 43% in BEL ahead.

In its high conviction picks for the March 2024 month report, Incred Equities expects the following key triggers to watch out for in BEL for the coming months:

- BEL projects a topline growth of around 15% in FY24F, driven by its products and platform delivery timeline. The export revenue is likely to double to US$90-100m in FY24F.

- Strong growth in the non-defence segment is likely in FY24F because general elections in India in May 2024 will drive the demand for electronic voting machines or EVMs and VVPAT equipment. In FY19, revenue from the non-defence segment grew by over 2x vs. overall revenue growth of 17%.

Further, Incred's note said that on the back of robust new order wins worth more than Rs.270bn so far in FY24F, and significant orders in the pipeline, BEL is likely to continue maintaining its 3x order book-to-sales ratio.

BEL plans to allocate ~Rs7-8bn towards capital expenditure in FY24F, which the brokerage believes will be incurred for expanding its existing facilities and constructing new facilities. These facilities could be commissioned in the next 2-3 years.

In a bull-case scenario, Incred's note said, "We see the scope for higher sales of manufactured goods leading to an improved EBITDA margin of ~25% vs. our current estimate of 22%. This can raise our FY24F/25F EPS estimates to Rs.5.6/Rs.6.5, respectively, which are ~10% above our current estimates."

On the valuation, Incred's note added, "At 36x one-year forward EPS, BEL's valuation is in line with our estimate. Strong order booking in the next 2-3 quarters can further improve the valuation. We retain our ADD rating on the stock with a target price of Rs.235." It lastly said, "A bull-case scenario could lead to a higher multiple of 40x Dec 2025F EPS, leading to a higher target price of Rs.270."

Last week, on Friday, BEL's share price ended at Rs 188.85 apiece, down by 3.55% with a market cap of Rs 1,38,045.17 crore. BEL's 52-week high and low stood at Rs 216.70 apiece and Rs 89.68 apiece respectively.

BEL Dividend:

The company's board members declared a second interim dividend of Rs 0.70/- (70%) per equity share of Rs 1/- each fully paid up for the financial year 2023-24. The second interim dividend will be paid within 30 days from the date of declaration.

The record date has been fixed on March 23, 2024. Earlier, BEL paid its first interim dividend of also Rs 0.70 apiece or 70% for FY24. In FY23, the payout was 180% amounting to Rs 1.8% per share.

Currently, BEL has a dividend yield of 1.01%.

BEL Stock Split:

The aerospace & defence major 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.

BEL Bonuses:

In a decade, 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.

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.

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.