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Government-owned aerospace and defence electronics company, Bharat Electronics (BEL) defied Thursday's market crash and clocked a new all-time high. BEL is a multibagger as it has given more than 195% return in a span of two years. In a year, the growth has been double-digit. The bull run in BEL shares comes after shareholders approved a bonus issue and 150% dividend at the 68th AGM. Improving inflows and prudent working capital management are likely to strengthen BEL going forward. Thereby, JM Financial analysts has given a 'buy' rating on the stock.
On BSE, BEL shares closed at ₹319.85 apiece up by ₹13.35 or 4.36%. The shares were near the fresh 52-week high of ₹320.85 apiece --- which is also the new all-time high.
In a year, BEL shares have shown strong growth despite deep market volatile conditions by surging nearly 69%. Last year, on September 1, the shares were around ₹189.60 apiece.
Meanwhile, in two years, the shares have skyrocketed by a whopping over 196%. The shares were around ₹108 apiece on September 1, 2020.
In the 68th annual general meeting (AGM), BEL shareholders approved a bonus issue of a 2:1 ratio and a final dividend to the tune of 150% for the financial year FY22.
BEL will issue bonus shares to its shareholders in the ratio of 2:1. Simply put, the company will issue two bonus equity shares for every one existing shares -- by capitalising ₹487.32 crore -- standing to the credit of the free reserves and surplus.
Generally, a listed company announces bonus shares as a form of incentive which can be called additional shares over the shareholders' existing shares. The ratio of the bonus issue is decided by the company.
BEL has announced a final dividend of ₹1.50 per equity share (150%) having a face value of Re 1 each fully paid up for the fiscal FY22.
Last month, BEL announced that if the final dividend for the financial year 2021-22 was declared in the 68th AGM, then be payable within 30 days from the date of declaration, to shareholders.
Those shareholders whose name appears in the company's register of members on the closing business hours of August 10, 2022 -- will be eligible for a 150% final divided. August 10 was the record date to determine shareholders.
Typically, dividends are a form of incentives that shareholders receive for holding shares of a profitable company.
JM Financial who attended BEL's analyst meet on August 30, highlighted that the company's management pointed out that with the 3rd indigenisation list published by MoD, total opportunity size has increased to ₹2 trillion in 5-6 years. Further, the company maintained its FY23 revenue growth guidance of 15% to ₹175 billion and 12-15% CAGR over next 3 years, led by execution in large projects – LRSAM, Akash Missiles, and IACCs and EVMs.
"This will be supported by order inflows of ₹200 billion in FY23, which should result in year ending order backlog position of ₹600 billion. Also, the company reiterated its EBITDA margin guidance in 21-23% range, but indicated that it will be closer to the upper end of this range. The company is looking to step up supplies in non-defence areas and exports materially in FY23," Sandeep Tulsiyan and Gaurav Uttrani analysts at JM Financial said.
Further, the company's management has highlighted that they intend to increase revenue contribution to 25% in next 2-3 years from non-defence space. Major contribution to the revenue in the space would be from homeland security and smart city segments, followed by rail and metro segment (for train management system) and Airport Authority of India (for air traffic management system).
BEL management has given annual inflow guidance of ₹200 billion as the company may spread out over multiple years.
Currently, BEL's active order pipeline stands at over ₹500 billion, including surface-to-air missiles (new-LRSAM, QRSAM, MRSAM, Akash), naval equipment (NGMV, OPVs) and EW systems/radars (ground and airborne).
On the valuation, the analysts said, "We maintain positive view on BHE given its robust order book, margin resilience and a strong balance sheet position with 5-year high RoIC of 42%. Maintain BUY with revised TP of ₹350 (23x Sep’24E EPS), as we forecast sales/EPS CAGR of 15%/19% over FY22-25E."