Prabhudas Lilladher has added Bharat Electronics (BEL), a major defense PSU, to its list of high-conviction picks, recommending investors to accumulate the stock with a target price of ₹341. Despite a recent significant correction, with BEL closing around ₹287 during the trading week of October 14-18, it remains one of the top-performing defense stocks for the long term.
The brokerage cites BEL’s robust long-term prospects, supported by several factors:
- A healthy order backlog of approximately ₹767 billion (3.7 times TTM revenue).
- A defense opportunity pipeline of around ₹500 billion over the next two years, including 5-6 programs valued between ₹50-100 billion each.
- Diversification into non-defense sectors such as civil aviation, infrastructure, and rail & metro, with a notable opportunity to supply the Kavach system to Indian Railways over the next 5-6 years.
Prabhudas Lilladher anticipates that BEL will report revenue and adjusted PAT CAGR of 17.6% and 17.3%, respectively, over the FY24-26 period. The recent decline in the stock price offers an attractive opportunity for long-term gains, according to the brokerage.
Currently, BEL trades at ₹287 on the NSE, with a market capitalization of ₹209,790.65 crore, having fallen 16% from its 52-week high of ₹340.50 reached on July 10, 2024.
Notably, BEL has experienced remarkable growth, with an all-time gain of 130,354.55%. The stock, which was valued at just ₹0.22 per share on January 1, 1999, has undergone stock splits, bonus issues, and dividends over the years.
BEL has issued three bonus shares to date and has delivered 51 dividends since August 2001. In the past 12 months, the company distributed ₹2.2 per share in dividends, yielding 0.79%. The stock has split only once, in March 2017, at a ratio of 1:10. The latest dividend payout was ₹0.80 (80%), with the stock turning ex-dividend in August 2024.
With its strong track record and favorable market conditions, BEL remains a compelling investment for those looking to capitalize on the growing defense sector.
Disclaimer: This communication is for informational purposes only and should not be considered as financial advice. The views and opinions expressed herein are those of the author and do not constitute a recommendation to buy or sell any securities. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results, and all investments carry risk, including the potential loss of principal.
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