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Government-owned Bharat Electronics (BEL) has proposed the issue of bonus shares to the equity shareholders of the company. The company's board of directors will be meeting on August 4 to consider the proposal. On Monday, BEL shares hit a fresh 52-week high on stock exchanges tracking positive market cues. Experts are optimistic on BEL shares after the company witnessed a strong earnings in the first quarter of fiscal FY23. The company is expected to record robust growth in pipeline ahead.
On BSE, BEL shares closed at ₹282.75 apiece up by ₹7.70 or 2.80%. The company hit a new 52-week high of ₹287.75 apiece earlier today. Its market cap is around ₹68,894.67 crore on the D-Street.
In its regulatory filing, BEL said, "we wish to inform that a meeting of the Board of Directors of the Company is scheduled to be held on Thursday, the 4th August 2022 inter alia to consider a proposal for issue of Bonus Shares to the equity shareholders of the Company."
A listed company distributes bonus shares on their equity shares to current shareholders free of charge. Through this, a shareholder can capitalise a part of the company's retained earnings for conversion of its share premium account, or distribution of treasury shares.
The company has announced its financial performance for the quarter ending June 30, 2022 (Q1FY23).
In Q1FY23, the company's standalone net profit stood at ₹431.49 crore against the profit of ₹11.15 crore recorded in the corresponding period of the previous year. Standalone turnover for the period stood at ₹3063.58 crore against ₹1564.34 crore in the same quarter last year.
As of June 30, 2022, the company's order book position is around ₹55,333 crore.
Should you invest in BEL shares?
Sandeep Tulsiyan and Gaurav Uttrani analysts at JM Financial said, "BHE remains our top pick on continued indigenisation in defence and increasing share of electronics in all large platforms as: a) positive surprise in growth due to expansion in civilian segment (railways, medical electronics, batteries and smart cities), exports (export inflows to more than double to $400mn) and service income (AMC for Russian equipment), b) margin expansion in last 5 years (despite Pay Commission implementation, margin cap on nominated orders and high share of outsourcing), and c) improved financial strength as NWC turned negative (22days to -24 days) and robust RoICs (42% in FY22 vs avg of 31% in past). We revise our TP to ₹315, as we roll forward by 6-months, valuing stock at 20x Sep’24E EPS."
Chirag Shah and Vijay Goel, research analysts at ICICI Direct said, major orders expected in FY24E are QRSAM (Quick Reaction Surface-to-Air Missile) worth ₹20,000 crore and MRSAM (Medium Range Surface to Air Missile) worth ₹15,000-20,000 crore. Army is in process of take up AoN (Acceptance of Necessity) post which they will issue RFP after approvals.
"Overall, expected double-digit revenue, order inflow growth, sustained margins, and strong order book to ensure better performance," ICICI Direct analysts added, "We remain long-term positive and retain our BUY rating on the stock. We value BEL at ₹315 i.e. 25x P/E on FY24E EPS."
Among the key triggers for BEL shares' future performance as per ICICI Direct analysts are:
- Strategy to diversify into non-defence areas, and focus on increasing exports and services share would aid long-term growth and help de-risk its business.
- Strong order pipeline in FY23-24E.
- Expect revenue, and EBITDA to grow at a CAGR of ~16.8%, and 16.3%, respectively, in FY22-FY24E aided by sustained margins in the range of 21-22%.
- Strong balance sheet, double-digit returns ratios.