Defence PSU, Bharat Electronics has emerged among the best performing alpha stocks on Nifty in 365 days and 30 days period. With the general election of 2024 right around the corner, BEL shares touched back-to-back all-time highs before seeing slight profit-booking on April 16. Riding on the back of long-term bulls, BEL shares have skyrocketed by a massive 1,800% in 8 years.
BEL Share Price:
On NSE, BEL share price stood at Rs 233.80 apiece, broadly flat with a market cap of Rs 1,70,902.63 crore on April 16. Before this day, BEL had touched a fresh all-time high of Rs 238 apiece.
From its 52-week low of Rs 100, BEL shares have more than doubled. In a year, the stock is up by 130.15%, while its 5-year performance has been robust with gains of 694.69% on BSE so far.
BEL is among the top bets if PM Modi-led government once again takes reign in the 2024 election. Due to a robust order book, huge pipeline of execution, and healthy earnings, BEL is in the sweet spot to gain massively ahead.
Since 2014, when the government took charge of India, bringing in transformational measures for the defence sector over the years, BEL shares have seen a tremendous rally.
8 years ago, on April 12, 2014, BEL shares were at Rs 12.17 apiece. Since then the stock has zoomed by a huge 1,811.54%. These gains are adjusted to stock split and bonus issues that follow.
Also, BEL is a star performer of Nifty 200 Alpha index. In a month, the stock rallied by 24.15% on the NSE, outperforming its counterparts amidst escalating geopolitical tensions. In 365 days, the gains are around 132.36% on NSE so far.
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.
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. While 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.
BEL has received a positive outlook due to its strong order book. In FY24, the company successfully secured orders worth around Rs. 35000 crore. While overall, in FY24, BEL registered a turnover of Rs 19,700 crore against the previous year's turnover of Rs 17,333 crore recording a growth of 13.65% YoY.
Last month, BEL, Midhani and BEML inked an MoU for the indigenous development of an Advanced Fuelling and Control System for Engines for heavy-duty applications.
This collaborative initiative will focus on leveraging indigenous capabilities to design, test, and manufacture an Advanced Fueling and Control System that offers enhanced efficiency, performance, and reliability. By harnessing the latest advancements in engine technology and control systems, the companies aim to extend their domain expertise for the development of engine systems which will ensure self-reliance in the field of Combat vehicles. The MoU corroborates the resolve of the Government to develop complex technologies within the country under the 'Aatmanirbhar Bharat' initiative.
Short-Term and Long-Term BUY/Sell Target For BEL:
At the latest, Macquarie 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.
Meanwhile, Jefferies believes the company is well-placed to benefit from opportunities in the Indian defence segment, as its 70-75% revenue is shored up from the navy and army deals followed by air-force orders. Also, BEL is extra favourable due to its zero-debt and healthy working capital position. It has set a target of Rs 260.
Anand Rathi on the other believes BEL will see strong growth going forward due to many factors such as: 1) Moving towards self-reliance in defence, 2) Robust pipeline and focus of exports by GOI 3) Strong order inflow to drive the revenue growth 4) Healthy profitability and return indicators. Hence, it re-initiated a 'BUY' coverage with a target price of Rs 250.
The nearest target to BEL is Rs 240, which was assigned by ICICI Direct earlier.
However, there are also short-term sell calls on BEL as well. The 1-year average target is at Rs 201, indicating a drop of 14%, as per Trendlyne data.
However the Trendlyne data also revealed that the the consensus recommendation from 25 analysts for Bharat Electronics Ltd. is BUY. Out of the total, 16 analysts have suggested STRONG BUY, while only 2 recommended buy and 4 analysts hinted at HOLD.
Additionally, despite giving a buy recommendation, JM Financial sets a target of Rs 210. Motilal Oswal also has set a similar target price of Rs 210 with a Neutral recommendation. On the other contrary, Kotak Institutional Equities has recommended SELL for a fair value of Rs 130.
Defence Sector Reforms:
The government has taken adequate steps to make the country self-reliant in the defence sector, by developing indigenous advanced technologies and complex systems. During the last three financial years (2020-21 to 2022-23), 122 contracts have been signed for capital procurement of defence equipment, out of which, 100 contracts accounting for 87% of total contract value, have been signed with Indian vendors for capital procurement of Defence equipment.
As per IBEF data, the top three largest market segments of the Indian defence sector are military fixed wing, naval vessels and surface combatants, and missiles and missile defence systems. Military rotorcraft, submarines, artillery, tactical communications, electronic warfare, and military land vehicles are some of the other well-known segments.
India has the world's third-largest defence expenditure, as of 2021, and expects to export equipment worth US$ 15 billion by 2026, IBEF added. It added that the major defence manufacturing companies in India are Bharat Earth Movers Ltd. (BEML), Bharat Electronics Ltd. (BEL), and Hindustan Aeronautics Ltd. (HAL).
Accordingly, with the optimistic outlook on the sector, BEL shares look promising.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, 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.
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