1:10 Split, 3 Bonus: Defence PSU Stock Rises 100% Ahead Of 70% Dividends; ICICI Direct Says BUY For Rs 240 TP

Aerospace & Defense giant, Bharat Electronics is moving close to its 52-week high of Rs 216.70 apiece. On Wednesday, the stock gained by a massive 1.2% to hit an intraday high of Rs 187.85 apiece, and maintained the levels around it. At the current price, BEL has more than doubled in a year, and there is still more room to buy. BEL is in focus ahead of its 70% interim dividend payout.

BEL Share Price:

Currently, BEL shares are up by 108.88% from its 52-week low of Rs 89.93 apiece. While the stock's 52-week high is Rs 216.70 apiece.

At the time of writing, BEL shares traded at Rs 187.20 apiece, up by 0.9% with a market cap of Rs 1,36,839.06 crore which was near its intraday high of Rs 187.85 apiece on Wednesday.

BEL Dividend:

The defence player's board has 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.

For FY24, BEL earlier paid its first interim dividend of also Rs 0.70 apiece or 70%. Meanwhile, in FY23, the payout was 180% amounting to Rs 1.8% per share. On the current market price, BEL has a dividend yield of 0.95%. 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 Stock Split And Bonus Issues:

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. But, BEL is a bonus shares rewarder!

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.

ICICI Direct Recommendation, Outlook, Target Price On BEL:

In its latest research note, ICICI Direct said, "Valuation at 28x P/E on FY26E basis looks attractive considering the healthy growth ahead, strong sectoral tailwinds and company's consistency in terms of orders inflows and execution. We recommend BUY on BEL with a target price of ₹ 240 per share (based on 36x FY26E EPS)."

The brokerage highlights two investment rationales for its recommendation:

1. Huge opportunity in the defence segment:

BEL is favourably positioned to capture the larger pie of huge opportunity in the Indian defence & space electronics systems/sub-systems or components industry which is expected to clock 13-14% CAGR over FY22-27 with the share of defence electronics (in total defence production) increasing to 40-42% by FY27 (vs. current share of 36-37%).

BEL is expected to be the key beneficiary in this impending opportunity in the indigenisation of defence platforms considering its strong technical expertise and capabilities in designing, developing and manufacturing a wide range of strategic electronic products/systems.

2. Healthy Order Book:

The company's order inflow stands at ₹ 32716 crore during YTDFY24 (as against inflows of ₹ 19000-20000 crore in FY22 & FY23) led by the defence electronics segment. The current order backlog is estimated at ~Rs 73500 crore (3.8x TTM revenues), providing healthy revenue growth visibility.

Also, the order pipeline remains robust in defence electronics (which includes electronic warfare, radars, communication & control systems, navigation systems, avionics etc for various platforms like fighter jets, warships, missiles, and unmanned Ariel vehicles), non-defence and exports.

Accordingly, ICICI Direct's note said, "Healthy order backlog with robust pipeline provides strong earnings visibility. Moreover, 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. We expect revenue & PAT to grow at a CAGR of 14.3% & 17.6%, respectively over FY23-26E aided by sustained margins at ~23%. Balance sheet remains strong with healthy returns ratios."

Bharat Electronics (BEL) is a leading aerospace and defence electronics company. It primarily manufactures advanced electronics products.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor 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.