1:10 Split, 5 Bonus, 51 Dividends: Is Zero-Debt Defence PSU Stock BEL Undervalued After 5% Weekly Drop? Target

Defence PSU giant, Bharat Electronics (BEL) continues to witness selling pressure. During the trading week from September 30th to October 4th, BEL stock dipped by 5.4% and is currently below Rs 280 apiece. Also, BEL's monthly performance is in red, with a decline of 2.19%. Not only that BEL is not a multibagger in its 1-year performance anymore. Does that mean BEL is undervalued?

Last week, on Friday, BEL stock ended at Rs 277.40 apiece, down by 0.5% on NSE. While its weekly decline is by 5.4%, and its monthly drop is 2.2%. BEL's gains have been squeezed due to the sharp corrections in the past few weeks.

BEL's YTD performance is in green with the upside of 50%. While in a year, BEL's gains are at 99.57%. Earlier, from September 28, 2023 (Rs 138.25 apiece) to September 30, 2024 (Rs 285.05 apiece), BEL stock was up by 106% on NSE.

From its 52-week high of Rs 340.50 apiece recorded on July 10, 2024, BEL is currently down by 18.5%.

Does that make BEL undervalued?

As per Alpha Spread data, the estimated DCF Value of one BEL stock is 89.22 Rs. Compared to the current market price of 277.2 Rs, the stock is Overvalued by 68%.

However, as per Trendlyne data, BEL has underperformed its sector. The stock rose 99.5% and underperformed its sector by 80.54% in the past year. Despite this, BEL's Price to price-to-earning ratio is 47.82, lower than its sector PE ratio of 68.14, and also 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.

It needs to be noted that BEL's Debt to Equity Ratio is zero, meaning, the company is debt-free.

Should You BUY OR Sell?

As per Trendlyne data, the consensus recommendation from 24 analysts for Bharat Electronics Ltd. is BUY. EPS is expected to grow by 16.1% in FY25. Also, the 1-year average target price is set at Rs 330.74 apiece on BSE, hinting at 19% potential upside.

Also, brokerage Antique Stock Broking has recommended BUY for a strong target price of Rs 385 apiece.

BEL Corporate Actions:

BEL has a strong track record of bonuses, and dividends, while the stock has split only once.

Bonus Issue: So far, BEL has delivered 3 bonuses, but in total has given five free shares. The first bonus issue was 2:1 in September 2015, meaning 2 bonus shares on the existing 1 share. While the second bonus issue was 1:10 in September 2017, meaning, 1 bonus share on the existing 10 shares. And similarly, the last bonus issue was 2:1 in September 2022.

Stock Split: BEL has split only once and that was in March 2017. The split ratio was 1:10, meaning 1 equity share of a face value of Rs 10 of BEL was split into ten shares with a face value of Rs 1 each.

Dividends: Since August 2001, BEL has distributed 51 dividends, as per Trendlyne data. In the last 12 months, BEL delivered dividends of Rs 2.2 per share. Currently, it has a dividend yield of 0.79%.