150,582% Up, 1:10 Split, 2:1 Bonus, 80% Dividend: Will Zero-Debt Defence Stock Bel Hit Rs 400 Before Budget?

Bharat Electronics (BEL) has been among rising star of 2024 in its defence sector with back-to-back new large deals, extending new all-time high gains, and holding a strong pipeline execution case in the long term. BEL is favourite of brokerages and they are bullish on the stock. This is despite the decline in FII/FPI and mutual funds holding in BEL stock. YTD, the stock has risen by nearly 80%, and is currently near its 52-week high of Rs 340. With Budget 2024 around the corner, does BEL have the potential to touch Rs 400 mark ahead of the big announcement.

The Union Budget 2024 is going to be the first budget of PM Modi and his government's after third clear win in Lok Sabha election, taking the reign of Parliament once again. The Budget FY25 is expected to reflect policy continuity which also means a big boost to defence sector to strengthen its export orders and turnovers ahead.

Amidst this, BEL stock touched back-to-back new highs last week. On July 10, BEL share touched its new lifetime high of Rs 340.50 apiece. Soon after the stock price corrected as investors cashed in their gains. BEL's share price closed the week at Rs 331.50 apiece with a market cap of Rs 2,42,319.17 crore. BEL is the second most valued company in terms of market share in the defence sector, but also among the most affordable defence stocks as its peers trade at a higher value per share.

YTD, BEL gained by 79.24% on NSE, while in a year, BEL stock emerged as a multibagger by surging nearly 161%. In 5 years, the stock's rally is nearly 838%. But its all-time gains are humungous by a whopping 150,581.82%. The stock was at a meagre Rs 0.22 apiece on January 1, 1999.

BEL stock has continued to rise extraordinarily despite slight pullbacks in the holding of FPIs and Mutual funds. By the end of the June 2024 quarter, mutual funds holding declined to 16.08% from earlier 18.06% in the stock. While FIIs or FPIs holding contracted to 17.43% in Q1FY25, compared to 17.56% in the previous quarter.

But BEL's fundamentals are broadly positive. As per Trendlyne data, BEL's stock rose 165.42% and outperformed its sector by 10.81% in the past year. Yet, BEL is undervalued as its Price to price-to-earning ratio is 61.11, lower than its sector PE ratio of 76.34. Further, its 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. Not to forget, the company's Debt to Equity Ratio is zero as it is debt-free.

Will BEL stock hit the Rs 400 mark before the Budget?

Market expert Ashish Bahety now believes that the BEL stock has the potential to touch levels of ₹400 per share going ahead, as per a CNBC-TV18 report. As per him, the short-term targets are set at Rs 360 for BEL; if the stock surpasses Rs 360, then BEL could potentially see a zone up to Rs 400 thereafter. He has suggested a stop loss of Rs 320 on BEL.

While Motilal Oswal has added BEL as its top Budget pick. Trendlyne data currently suggests that the consensus recommendation from 26 analysts for Bharat Electronics Ltd. is BUY. Out of the 26 analysts, 20 of them have recommended either 'STRONG BUY' or 'BUY'.

On July 12, BEL announced that it had obtained an export order worth Euro 25.75 Million (Estimated Value Rs.230 Crores) from Thales Reliance Defence Systems (TRDS) for the manufacture and supply of Transmit Receive (TR) modules. The TR modules will be used in the radars of fighter aircraft.

Additionally, BEL has secured orders valued at Rs.192 Crores following the last disclosure on 28 June 2024 which comprises communication equipment, encryptors, spares and services for Radars, Fire Control Systems etc. With these, BEL has now accumulated orders totalling Rs.5,225 Crores in the current financial year.

Going ahead, BEL will be in focus for its upcoming Q1FY25 results announcement. The company's board of directors are expected to meet on 29-Jul-2024 to inter-alia consider and approve the Unaudited Financial results of the Company for the Quarterly ended June 2024.

Also, BEL will be in focus as it is set to pay a Final Dividend of Rs.0.80 per Equity share (having a face value of Rs.1/- each). The record date for the final dividend is likely to be announced soon.

Apart from being a top dividend-paying defence stock, BEL also 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. Also, 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.