BEL Vs HAL: Stock Splits, Bonus, Dividends; Which Zero Debt Defence PSU Stock To Buy Before Budget?

Three defence PSU stocks namely Bharat Electronics (BEL), Hindustan Aeronautics (HAL) and Bharat Dynamics are back in the focus as India awaits for Union Budget 2024 announcement. The Defence Ministry aims to achieve Rs 1.75 lakh crore turnover by 2025 in aerospace and defence sector. Experts believe key measures by PM Modi government to meet this target are expected.

By 2025, India's defence ministry aims to achieve Rs 1.75 lakh crore turnover in aerospace and defence sector, coupled with aim to reach Rs 50,000 crore exports by 2029-2030.

As per IBEF data, India's defence budget of US$ 74.7 billion ranked fourth highest globally in 2024. ​Further, the Government of India opened the defence industry for private sector participation to provide impetus to indigenous manufacturing.​

In financial 2024-24, defence exports stood at $ 2.63 billion, up by 32.5% from last year.​​ In rupee terms, the exports were at Rs 20,000 crore.

IBEF also said that in the Interim Budget 2024-25, US$ 2.9 billion (Rs. 23,855 crore) was allocated to DRDO, while a corpus of US$ 12.0 billion (Rs. 1 lakh crore) was earmarked for Deep Tech, offering long-term loans to tech-savvy companies to foster innovation in defence technologies within India.

Accordingly, India aims to be a global leader in the defence sector. And hence, this Budget 2024 is going to be key to achieving its target.

Rajinder Bhatia, President of the Society of Indian Defence Manufacturers (SIDM), emphasised the need to operationalise existing policies to meet these targets. He highlighted that private industry, contributing approximately 65% of current defence exports, is pivotal to this growth, as per CNBC-TV18.

According to Bhatia, the necessity of establishing a framework for government-to-government sales, a dedicated defence exports desk within the Exim Bank, and lines of credit to boost exports. He also called for an acceleration of strategic partnerships and the launch of significant programs such as the P-75(I) submarine project. He believes that these initiatives are crucial for bolstering India's defence, as per the report.

Should you buy BEL or HAL stocks?

BEL and HAL are the giants of the defence sector. Both companies are debt-free with a healthy return on equity history.

Bharat Electronics (BEL):

Share Price: BEL stock touched a new 52-week high of Rs 326.75 apiece on July 5, before ending at Rs 324 apiece up by 2.10% on BSE with a market cap of Rs 2,36,836.83 crore. YTD, BEL stock surged by over 75%.

Dividend: BEL has announced a final dividend of Rs 0.80 per share for FY24 for which the record date will be announced soon. This will be in addition to the two interim dividends of Rs 0.70 per piece each paid in 2024 earlier. Since August 2001, the company has delivered up to 50 dividends.

Bonus Issue: BEL has a strong history of rewarding bonus shares. The latest bonus was 2:1 in September 2022, following a 1:10 bonus issue in September 207 and another 2:1 bonus issue in September 2015.

Stock Split: BEL stock has been split only once and that was in March 2017 in the ratio of 10:1.

BUY/SELL: Prabhudas Lilladher said, "With the robust order intake pace, the company is well on its way to achieve ~Rs250bn order intake expectation set for FY25. Furthermore, we remain positive on BEL's long-term growth given their diversification into non-defence verticals and their focus on exports."

This comes after BEL announced that it signed a contract valued at Rs.3,172 crore with Armoured Vehicles Nigam Limited (AVNL) on June 28, 2024, at AVNL Headquarters in Chennai. With that, the total orders received in FY25 so far are to the tune of Rs 4,803 crore.

Antique Stock Broking has recommended BUY with a target price of Rs 339 on BEL.

Hindustan Aeronautics (HAL):

Share Price: Just like BEL, the defence PSU giant HAL also touched a new 52-week high of Rs 5,624.60 apiece on July 5. The stock ended at Rs 5550.45 apiece, up by 0.6% on Friday with a market cap of Rs 3,71,200.22 crore. HAL stock is up by 96% YTD.

Dividend: In FY24, the company delivered a dividend of a whopping 440% amounting to Rs 22 per share. This is compared to the 550% dividend payout in FY23. Since March 2019, the company paid up to 11 dividends.

Stock Split: HAL has carried one of the latest stock splits in the defence sector. In September 2023, the stock split in the ratio of 10:1.

Bonus Issue: Unlike BEL, HAL has not carried any bonus issues yet.

BUY/SELL?: Antique Stock Broking has set an ambitious target on HAL of Rs 6,145 with a BUY recommendation.

Choice Broking recently said, "We have a bullish outlook on HAL, given its strong market position and limited competition from the private sector, largely due to the high capital requirements and lengthy development timelines in this industry. HAL's strategic diversification into the civilian sector and anticipation of major future orders for platforms like LCA Tejas Mk-1A, LCA Tejas Mk-2, LUH, LCH, Su30, and HTT-40 in the near to medium term further bolster its growth prospects. The company is strategically positioned as the sole domestic supplier and has formed valuable collaborations with industry giants such as Safran, Airbus, and GE. Moreover, HAL's impressive order book, standing at approximately Rs.940 billion-about 3.1 times the FY24 revenue-reinforces its robust growth narrative."

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.