Zero-debt defence PSU giant company, Bharat Electronics (BEL) has given zero returns in August as the stock price fell nearly 4% on BSE and NSE. BEL stock fell below Rs 300 on the exchange and is showcasing a buy-on-dips strategy. The majority of experts are optimistic about BEL and have recommended BUY with target prices ranging from Rs 360 to Rs 390. Despite a bearish August, BEL is a multi-bagger and among best-performing defence stocks in long-term basis.
BEL Share Price:
BEL share price ended at Rs 299.50 apiece on NSE, with a market cap of Rs 2,18,927.88 crore. The stock has corrected significantly from its all-time high of Rs 340.50 apiece that was recorded on July 10, 2024. While the stock has more than doubled from its 52-week low of Rs 127 apiece.
In August 2024, the stock dropped by 3.74% on NSE. Nonetheless, BEL has gained by nearly 62% year-to-date, while emerging as a multi-bagger with a surge of 117.27% in a year. BEL's all-time gains are a breathtaking 136,036.36%.
Is BEL Undervalued?
As per Angel One data, conventionally, a PB ratio of below 1.0, is considered indicative of an undervalued stock. Some value investors and financial analysts also consider any value under 3.0 as a good PB ratio. However, the standard for "good PB value" varies across industries.
As per Top Stock Research, the PB ratio of BEL with the value of 14.34 shows that the company is trading much above its Book value and may be risky. PB Ratio of BEL rose handsomely by 78.35 % this year. Also, the PB Ratio of BEL trending up for at least three Years.
However, as per Trendlyne data, the Price to price-to-earning ratio is 51.64, lower than its sector PE ratio of 68.25. The stock's 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. Noteworthily, Stock Price rose 124.7% and underperformed its sector by 23.11% in the past year.
Other key positives for BEL as per Trendlyne data are that the Debt to Equity Ratio is zero as the company is debt-free. While Promoter Share Holding stayed the same in the most recent quarter at 51.14%. Additionally, Interest Coverage Ratio is 800.64, higher than 1.5, which means that it is able to meet its interest payments comfortably with its earnings (EBIT). Lastly, Promoter Pledges are zero.
BEL In Focus This Week
BEL has entered Nifty 50 index, as part of NSE's latest semi-annual rejig. This will come into effect from September 2, 2024. On the other hand, JM's note highlighted that the exclusion of Divi's Lab and LTIMindtree would result in an outflow of $205 million and $221 million respectively.
Earlier, as per the JM Financial report, the inclusion of Trent and BEL will lead to an inflow of $523 million and $394 million from September 1, 2024.
Hence, positive momentum is likely this week.
BUY/SELL BEL?
Still, brokers are optimistic and bullish on BEL share price.
While giving a BUY recommendation, B&K Securities said, "guide for Rs 500 billion order inflow in the next two years (excluding QR-SAM orders which would be north of Rs 250 billion). Reiterated FY25 revenue to grow by 15% and EBITDA margins to be in the range of 23-25% with gross margins to be around 42-43% for FY25."
Further, B&K's note said, BEL is working on the prototype of KAVACH systems for the Indian Railways. This is an opportunity worth Rs 200-250 billion spread over four-five years essentially translating to Rs 40-50 billion every year. BEL expects the order to come in after 18-24 months. Accordingly, BEL is the brokerage's top pick.
Also, at the latest, JM Financial has recommended BUY with a target price of Rs 360, which hints at a potential 20.3% upside ahead. The same target price and recommendation is by Motilal Oswal. But the highest target on BEL is Rs 390 which is set by ICICI Direct, hinting at 30.30% potential upside ahead.
BEL Corporate Actions:
BEL shares turned ex-dividend on August 14, for its final dividend of 80% worth Rs 0.80 per Equity share (having a face value of Rs.1/- each). Overall, BEL is distributing a 220% dividend amounting to Rs 2.2 per share for FY24.
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.
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