1:10 Split, 2:1 Bonus, 136,855% Gains + 80% Dividend; Zero-Debt Defence PSU Stock BEL May Enter Nifty; BUY?

India's leading defence PSU stock, Bharat Electronics (BEL) is likely to enter the Nifty 50, which could stir massive inflows in the large-cap. BEL is among the star performers of the defence segment with all-time gains of over 136,850%. BEL has a huge order book and a strong pipeline execution ahead. It is brokerage Nuvama Alternative & Quantitative Research that believes BEL could enter the mainboard of NSE aka Nifty 50.

As per Nuvama's report, BEL and Tata Group-backed Trent could enter Nifty 50 which would be part of NSE's upcoming index rejig. The two stocks are expected to replace LTIMindtree and Divi's Labs.

If that does happen, as per Nuvama then BEL could potentially record an inflow of a whopping $440 million and Trent may witness an inflow of about $500 million as the base case scenario.

NSE's latest rejig announcement is expected in the second half of August month and may come into effect from September 30.

Notably, earlier, JM Financial has also said similar trajectory. The brokerage expects Trent and BEL to be added to the Nifty 50 list. The inclusion is likely to create a flow of 412 million dollars in Trent, and 392 million dollars in BEL.

Both BEL and Trent are expected to replace tech giant LTIMindtree and Divi's Laboratories. On the exit from Nifty 50, as per JM, LTIM may witness an outflow of 180 million dollars, while Divis may log an outflow of 224 million dollars.

On NSE, BEL share price is at Rs 301.30 apiece, with market cap of Rs 2,20,243.64 crore. BEL has significantly corrected from its all-time high of Rs 340.50 apiece which was posted on July 10, 2024, on NSE. Nonetheless, BEL is a shining star of the defence basket.

YTD, BEL stock has zoomed by 63% on NSE, while year-on-year, the stock jumped 131%. And in 5-years, the stock's gains are about 841%. But in 25 years, from trading at Rs 0.22 per share on January 1, 1999, to crossing over the Rs 300 mark as of August 12, 2024, BEL stock has skyrocketed by 136,854.55% in the longest run.

As per Nuvama, India's defence sector's long-term growth story remains intact given GoI's push for building a local defence ecosystem (to be self-dependent) to cater to domestic as well as exports demand. However, the brokerage added, "We await large ticket-size orders, better execution rate/margin visibility over the next few quarters for the stock to re-rate hereon."

It further said, "We believe BHE has more positive catalysts/triggers than negative ones and has further scope for a re-rating from current levels subject to aforementioned ask rates."

Accordingly, Nuvama said, ". Maintain 'HOLD' based on 4%/1% revision in FY25E/26E EPS and a valuation rollover to FY27E EPS at 40x, yielding a revised TP of INR304 (earlier INR270)."

The highest target price on BEL is currently set at Rs 390 apiece, hinting at over 29% potential upside in the stock. This target is set by ICICI Direct.

Moving ahead, 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 set on August 14. And hence, only those investors will be eligible who are holding BEL stock in their demat accounts by end of August 14.

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.