1:2 Stock Split: BUY Defence PSU Stock For Target Price Rs 1,560; To Pay Rs 0.85/Sh Dividend Soon

Defence PSU giant, Bharat Dynamics Ltd (BDL) stock price corrected significantly last week, and has been trading from the day it turned ex-split for the first ever. BDL has split into a 1:2 ratio. In the trading week from June 3-6, the stock fell by 10.21% on BSE overall. This brings buy-on-dips opportunity in BDL. Choice Broking is the latest to recommend BUY on BDL. An upcoming event in the company is its dividend payout of Rs 0.85 per share.

On June 7, BDL share price ended at Rs 1430.30 apiece, up by 4.41% on BSE with a market cap of Rs 52,429.43 crore. However, the stock is lower from its 52-week high of Rs 1,660 apiece which was posted on June 3. But is trading up by 217.49% from its 52-week low of Rs 450.50 apiece.

One of the most anticipated stock split was of BDL and it took place on May 24, 2024.

BDL stock split into a 1:2 ratio, meaning, its existing 1 (One) Equity Share of the face value of Rs. 10/- (Rupees Ten Only) each fully paid up into 2 (Two) Equity Shares of the face value of Rs. 5/- (Rupees Five Only) each fully paid up.

The reason why BDL carried a stock split is to comply with DIPAM Guidelines on Capital Restructuring; To encourage wider participation of small investors, and To enhance the liquidity of the Equity Shares of the Company in the Stock Market.

On the day of ex-split (May 24), BDL share price ended at Rs 1527.50 apiece, up by 8.6% on BSE.

Hence, since its ex-split day, BDL shares have been corrected. This pullback in BDL shares brings the opportunity to fetch single-digit 9% gains in the short term.

In its latest research report, Choice Broking said, "BDL is a part of the Premier Organisation of GOI, with its over five decades of missile and countermeasure systems in defence equipment manufacturing experience. Under its
diversification program, BDL is poised to enter into the manufacturing of a wide variety of weapons/systems in defensive and offensive platforms."

Further, Choice's note added, "We have a positive outlook on BDL, as it is catering the strategic needs of the MoD & Indian

defence forces, supported by 1) Sole supplier of offensive, as well as defensive systems domestically, 2) Upcoming big-ticket project are in the pipeline & it is expected to materialize from FY25 onwards, 3) increasing exports opportunity, talks are underway with 4-5 friendly countries, 4) Diversified product portfolio across armed forces, 5) The company's humongous order book, which stood at ~Rs. 195bn as of 1ST April 2024 (~8.2x of FY24 revenue) will support the the growth story of the company."

"We like to ascribe a "BUY" rating due to the expensive valuation of the stock with a target price of Rs 1,560 (60x of FY26E EPS)," the brokerage added.

Going ahead, BDL has recommended a final Dividend @ Rs 0.85 per share (face value of Rs.5/-each) for FY24. This Dividend upon approval by the shareholders at the ensuing Annual General Meeting(AGM) will be paid within 30 days from the date of the AGM.

This payout will be in addition to the highest-ever interim dividend payout of Rs 8.85 per share or 88.5% by the company earlier in 2024. Together, the company's payout will be Rs 9.7 per share in FY24.

As per the Trendline data, BDL has delivered up to 12 dividends since September 2018.

FY24 revenue stood at Rs 2,369.27 crore, down from Rs 2,489.39 crore in FY23. On the other hand, FY24 PAT was at Rs 612.72 crore versus Rs 352.17 crore in FY23.

Bharat Dynamics Limited (BDL), was incorporated on 16th July 1970 in Hyderabad, Telangana as a Public Sector Undertaking under the Ministry of Defence, Government of India to be the manufacturing base for guided missile systems and allied equipment for the Indian Armed Forces.