1:5 Split, 38 Dividends: Not BEL, But BUY This Maharatna Defence PSU Stock For Rs 361/TP, 34% Upside Seen

A defence PSU company with Maharatna status is an attractive bet for potentially double-digit gains ahead. To be precise, this government-backed defence stock could rise by nearly 34%. Its new target price at Rs 361, while it currently trades below Rs 270. Who is it? It's not the large-cap behemoth Bharat Electronics (BEL), but instead a BSE-200 listed Bharat Heavy Electricals (BHEL) which has a market value of around Rs 93,632 crore as of October 3, 2024.

BHEL Share Price:

The heavy electrical equipment-making company is currently at Rs 268.90 per share on BSE after market hours of October 3. The stock price fell by over 4% in the closing bell on Thursday.

However, despite the latest consolidation, BHEL's share price is still on a positive note in overall 2024 performance so far. YTD, the stock zoomed by 35.6%.

The stock's 52-week high and low is at Rs 335.40 apiece and Rs 335.40 apiece respectively.

BHEL shares have also given significant rewards to its investors.

Dividend: Since August 2001, the company delivered 38 dividends. In the last 12 months, the dividend amount stood at Rs 0.2 per share. Current, dividend yield is at 0.09%.

Bonus Issue: Also, the company has carried two bonus rewards since 2007. The first bonus issue was of 1:1 in June 2007, followed by a 1:2 bonus issuance in September 2017.

Stock Split: BHEL has sub-divided its shares only once. In October 2011, BHEL shares turned ex-split in the ratio of 1:5, where the face value of Rs 10 was cut to Rs 2 per share.

BHEL Share BUY OR SELL?

According to Antique Stock Broking's latest note, BHEL announced winning a large order worth INR 61 bn (excluding taxes) from NTPC to set up an 800 MW (1 x 800 MW) Sipat thermal power plant (stage III). Thermal power plant order finalization has witnessed a sharp uptick in FY25 with INR 340 bn worth of orders getting finalized in the power sector.

Following this, Antique has upgraded BHEL to BUY rating (April 17, 2023, with a TP of INR 72) arguing that its annual average order inflow over FY24-27E will cross INR 600 bn, which is getting played out since FY24.

The brokerage believes that ordering momentum should continue, given the large order
pipeline in the power sector coupled with robust business opportunities expected to materialize in the fast-growing sectors such as railways, defence, and renewable energy.

Also, the brokerage expects a cumulative order inflow of INR 2.2 trn over FY24-26E, which coupled with the accelerated execution of the existing order book of INR 1.5 trn, to significantly improve BHEL's operational performance leading to a potential 156% earnings CAGR over FY24-27E.

Giving an investment summary, Antique's note said, "We expect BHEL to report an average annual order intake of INR 700 bn during FY24-27E, >2x its average INR 274 bn orders booked during FY12-23. Despite strong execution, we project the order book to rise to an all-time high of INR 2.2 trillion in FY27. Earnings could grow exponentially over the next three years, given strong operating leverage. We maintain BUY on the stock with a revised target price of INR 361, based on a PE of 32x 1HFY27E earnings."

The Maharatna company plays a crucial role in the strategic sectors of the nation, especially through its engagement in all three stages of India's nuclear power programme and as a supplier of critical equipment and services for defence and aerospace sectors for over three decades, including as a trusted supplier of Super Rapid Gun Mount (SRGM) naval guns - the Front Line Weapon for Indian Navy.