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

The two largest defence PSU stocks Bharat Electronics (BEL) and Hindustan Aeronautics (HAL) performance positive however the gains are marginal. Nonetheless, both companies are among the leading defence picks and are in focus s government's aims to increase exports. The Defence Ministry aims to increase defence exports over time. And this has come as a key positive for defence players both private and public.

In his second term as Defence Minister, Rajnath Singh announced a target of Rs 50,000 crore in exports of Indian defence equipment by 2028-2029. The minister has announced the government's determination to achieve self-reliance in defence manufacturing and modernisation of armed forces.

BEL and HAL are peers, both battling for the title of largest defence PSU in terms of market value which is currently held by HAL. Both have somewhat similar fundamentals such as HAL and BEL are debt-free companies and have zero promoter pledges. Both have a low PE ratio and healthy RoE. The order book is robust along with a strong execution pipeline in the companies.

However, HAL has outperformed BEL in YTD performance, while it is also a top pick of mutual funds than BEL.

Bharat Electronics (BEL):

Share Price: BEL's share price ended at Rs 305 apiece after market hours of June 21, down by 2.3% on BSE with a market cap of Rs 2,22,948.25 crore. The latest weekly performance was broadly flat. The stock's 52-week high and low are at Rs 323 apiece and Rs 117.95 apiece respectively.

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.

Fundamentals: One of the key fundamentals for BEL shares as per Trendline, is that BEL is a debt-free company. The price to Earning Ratio is 45.37, lower than its sector PE ratio of 73.63. Also, the 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. Furthermore, the stock rose 143.67% and outperformed its sector by 0.09% in the past year. Promoter Pledges are zero. On the other hand, Mutual Fund Holding decreased by 0.27% in the last quarter to 18.06.

BUY/SELL: On Trendline, the consensus recommendation from 26 analysts for Bharat Electronics Ltd. is BUY. BEL stock is expected to surge between Rs 330 to Rs 400 in the short term. Antique Stock Broking suggested BUY with a target price of Rs 339 ahead. The brokerage expects BEL's return on equity to be around 26.1% in FY25, and ROCE is seen at 27.1%.

Hindustan Aeronautics (HAL):

Share Price: HAL shares were also down by 2.3% to end at Rs 5168.55 apiece on BSE after market hours of June 21 with a market cap of Rs 3,45,659.70 crore. The stock's 52-week high and low are at Rs 5,585.65 and Rs 1,767.95 apiece respectively. Its weekly performance is marginally up, while YTD, the stock is up by 84%.

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.

Fundamentals: HAL's debt-to-equity ratio is zero, also making it a debt-free company. As per Trendlyne Price to Earning Ratio is 45.37, lower than its sector PE ratio of 73.63. Return on Equity(ROE) for the last financial year was 26.15%, more than 20% in the last financial year, indicating an efficient use of shareholder's capital to generate profit. The stock rose 168.69% and outperformed its sector by 25.11% in the past year. Also, Mutual Fund Holding increased by 0.06% in the last quarter to 6.75, and in the meantime, the Promoter Pledges are zero.

BUY/SELL: As per Trendline, the consensus recommendation from 13 analysts for Hindustan Aeronautics Ltd. is BUY. EPS is expected to reduce by 5.7% in FY25. ICICI Direct has set a target of Rs 5,700 on HAL with a BUY recommendation, while Jefferies has a target of Rs 5,725.

Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.