1:10 Split, 5 Bonus, 70% Dividend: Defene PSU Gives 105,877% Returns, Rs 15,000-To-Rs 1.58 Crore; Still Buy?

Bharat Electronics (BEL) has emerged as among the top performers on NSE in 2024 so far. The stock zoomed by 18.4% in a month, hitting back-to-back upper circuits despite volatility. While YTD, the stock is up by 26%, becoming one of the top-performing alpha stocks. But did you know this Navratna defence PSU is a crorepati-making stock too?

In the longest run, to be precisely 25 years, BEL has journeyed from less than 30 paise to over Rs 230 as of now. It has turned the Rs 15,000 investment of 25 years ago, into the breathtaking corpus of Rs 1.58 crore.

BEL Share Price:

On NSE, BEL's share price ended at Rs 233.15 apiece on April 19, up by 0.9% with a market cap of Rs 1,70,427.49 crore. On this day, when the market witnessed flash selling and buying, BEL stood steady among other defence stocks that happened to benefit from geopolitical tensions due to their robust order book.

Last week, BEL also touched an all-time high of Rs 238 apiece, while it has more than doubled from its 52-week low of Rs 100.40 apiece. As per NSE data, BEL shares have an adjusted price-to-equity ratio of 47.95%.

At the latest, ICRA reaffirmed BEL's long-term rating at [ICRA]AAA (pronounced ICRA Triple-A) and the short-term Rating at [ICRA] A1+ (pronounced ICRA A One Plus) ("Rating"). Outlook on the long-term Rating is Stable.

Amidst tensions in the Middle East and the commencement of election polls, the BEL share price will be in focus. Its next big key trigger would be Q4 results.

BEL Crorepati Stock:

BEL's all-time gains are massive by 105,877.27% on NSE. The stock price was just at Rs 0.22 on January 1, 1999.

So, an investment of Rs 15,000 in BEL on January 1, 1999, will bag returns of Rs 1,58,81,590.5 or over Rs 1.588 crore. This will total to a corpus value of Rs 1,58,96,590.5 or Rs 1.589 crore.

The price is adjusted to stock splits, bonus issues, and dividend payouts.

Dividend: 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.

Stock Split: 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.

Bonus Issues: While BEL has paid three bonuses to its shareholders since 2015, in total it distributed 5 bonuses. 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.

Brokerages are very optimistic about BEL's share price.

BEL Share Price Target:

For BEL, Jefferies in its report said, "Bharat Electronics is the market leader in domestic defence electronics. The company benefits from spending across the army, navy and airforce. Management has maintained its upbeat outlook commentary on recent result calls as the government's defence indigenisation focus continues."

It added, "Nondefence progress remains muted as MOU to supply battery packs for triton Electric Vehicles is yet to see any meaningful movement. FY24E-26E double-digit revenue growth is backed by the strong order book and pipeline. Margin strength gives confidence in profitability sustaining. Buy."

There are five key pointers highlighted by Jefferies' investment rationale.

1. Market leader in domestic electronics:

In the last 15 years, being a market leader has given it a strong headstart and depreciated asset base compared with private sector peers who began an investment cycle in the last 6-7 year.

2.Rs762 bn order book (up 52% YoY) provides FY24E-26E revenue visibility:

As per Jefferies, BEL has received Rs260 bn+ orders in 9MFY24 and already surpassed its Rs200 bn FY24E guidance. Management mentioned that the government has fast-tracked some defence ordering, and FY25E could see lower annual inflow at Rs250 bn. Larger projects like LRSAM, QRSAM, which are Rs150 bn+ each are not included in FY24E and point to Rs200 bn+ annual run-rate sustaining.

3. BEL - indigenization beneficiary:

The company's share in defence capital spend rose to 10% in FY23 vs 6% in FY14, when India's indigenization drive under the Modi government began.

Jefferies believe this could see some acceleration in the medium term as embargo lists come into effect and have factored this into a marginal rise in FY24E-26E revenue growth estimates.

4. Strong B/S, ROEs to rise:

BEL's ROEs have decisively moved from 15% to 20%+. Going forward, with a decisive government pushing forth defense reforms, we believe working capital and return ratios will continue to improve.

5. Robust Rs565bn 3-yr pipeline - export orders is surprise element:

Jefferies believes exports should rise to 11% of sales by FY30E from 3% in FY24E. As orders and earnings come through the stock should re-rate handsomely. We maintain our Buy rating with a revised PT of Rs260/sh, which reflects the multiple rising from 30x FY26E PE to 35x as we factor in the export growth story in estimates till FY30E. Downside risks: 1) Defence indigenisation push slows; 2) Cost controls prove unsustainable.

Accordingly, Jefferies has set target price of Rs 260 on BEL.

But the highest target price is set by Macquarie. This brokerage believes BEL stands out amidst execution risks in product-focused companies. Macquarie has set the highest target on BEL so far to the tune of Rs 280 apiece.

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.