Should You Invest in Stock of BEL (Bharat Electronics Ltd) Today? – Research & Ranking

The stock of BEL (Bharat Electronics Ltd) – After a historic announcement to ban the acquisition of 101 weapon systems and platforms from foreign countries, the government added more 101 defence equipment releasing the third ban list.

The weapons and platforms are planned to be indigenised (made in India) progressively from December 2022 to December 2027. This step has been taken keeping the “Make in India” or “Aatmanirbhar Bharat” vision in focus.

In defence minister Rajnath Kovind’s words, the third list is a symbol of 360-degree efforts being made by the government to achieve the vision of ‘Aatmanirbhar Bharat’.

These 101 items, with varying embargo timelines, include, highly complex Systems, Sensors, Weapons and Ammunitions like Light Weight Tanks, Mounted Arty Gun Systems, Guided Extended Range (GER) Rocket for PINAKA MLRS, Naval Utility Helicopters (NUH), Next Generation Offshore Patrol Vessels (NGOPV), MF STAR (Radar For Ships), Medium Range Anti-Ship Missile, Advance Light Weight Torpedo (Ship Launch), Medium Altitude Long Endurance Unmanned Aerial Vehicle (MALE UAV), High Endurance Autonomous Underwater Vehicle, Anti-Radiation Missiles, Loitering Munitions among others.

However, this outright ban on the import of these 101 weapons systems does not restrict defence sector companies in India from partnering with foreign companies for joint production in India in line with the government’s decision to hike the FDI limit in the defence sector from 49% to 74%.

This move is expected to give a thrust to domestic companies involved in the manufacture of arms, armaments and defence systems like L&T, BEL (Bharat Electronics Ltd), BEML, Bharat Forge etc. It will provide the domestic industry with ample opportunities to understand the trends and future needs of the Indian Armed Forces. Needless to say, the move will also stimulate fresh investments into technology and manufacturing capabilities boosting Research & Development (R&D) efforts.

With this, many stock market investors have a similar question in mind.

Is it the right time to invest in stock of BEL (Bharat Electronics Ltd. share price BSE)?

To help investors understand the answer, let’s first look at the business of BEL (Bharat Electronics Ltd) and its role in India’s defence sector.

BEL (Bharat Electronics Ltd), a public sector undertaking was established in 1954, in association with erstwhile CSF of France for manufacturing basic communication equipment. BEL, however, later diversified into the production of a wide range of state-of-the-art equipment in fields such as weapon systems, defence communication, radars, naval systems, telecommunications & broadcasting systems, electronic warfare equipment, tank electronics, and solar photovoltaic systems. Besides these BEL also provides turnkey system solutions.

BEL (Bharat Electronics Ltd) also manufactures civil use products such as electronic voting machines, tablet PC, solar-powered traffic signal systems and access control systems.

Strengths of BEL (Bharat Electronics Ltd)

What makes BEL a strong player is that it has a wholesome suit comprising a wide range of products built by multiple in-house technologies. The company has a strong reputation for quality excellence and the ability to develop innovative solutions that deliver superior performance.

BEL has an unbeatable track record in research and development right from the beginning. It has also successfully partnered with Defence Research & Development Organisation (DRDO), another premier government agency for setting up production labs across the country.

Not only in India but BEL designs, develops, manufactures and ships various products and systems to global clients addressing their diverse needs.

That’s the primary reason behind BEL’s strong order book.

Inflating order book – Booster for BEL

BEL (Bharat Electronics Ltd) had a robust order book worth Rs. 57,570 crores* as on 1 April 2022. Defence being the key business line of BEL it brought in 90% of revenue. FY22 being an exceptional year, BEL received new orders worth Rs. 19,016 crores during the same period.

Some of the major orders include Avionics Package for LCA, Advanced EW Suite for Fighter Aircraft, Instrumented
Electronic Warfare Range (IEWR), CDR TI cum Day Light Sights, Dhanush Gun Upgrade, Nayan EW Systems, WLR
(Mountain), Electronic Voting Machine & VVPAT and more.

BEL received its biggest ever export order from Airbus Defence & Space (USA) for manufacturing & supply of MAWS&RWR for C-295 Aircraft. Moreover, the company anticipates progressive order inflow in the next 2-3 years.

Being the sole manufacturer and supplier of many key defence systems and weapons systems in the country currently, BEL enjoys a huge monopoly.

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Now let’s take a look at the key financials of BEL (Bharat Electronics Ltd)

BEL (Bharat Electronics Ltd) has shown consistent growth in terms net profit over the last three years.

Debt levels of BEL (Bharat Electronics Ltd)

Before investing in the stock of BEL (Bharat Electronics Ltd) or for any stock, it is very important to check the debt levels of the company.

A company with zero or low debt will not only have enough cash to reward its shareholders with dividends but also adequate capital to fund further growth and expansion plans. On the other hand, any company which has heavy debts will have the burden to pay huge interest every month, which will affect its expansion plants significantly.

BEL (Bharat Electronics Ltd) is a debt-free company which is a very important attribute in fundamental investing. Its Debt to Equity or DE ratio has been 0.00 for the last four financial years

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BEL (Bharat Electronics Ltd) is a good dividend paymaster – (BEL share price NSE)

BEL (Bharat Electronics Ltd) has consistently declared dividends over the last few years. For the year ending March 2022, BEL had declared a dividend of Rs 4.50 per share. In terms of the current market price (BEL share price NSE) of Rs 281.65 as on August 8, the dividend yield of BEL is 1.60%. Bharat Electronics Ltd share price NSE

Recent updates on Bharat Electronics Ltd share price NSE

Bharat Electronics Ltd share price NSE recently reached an all-time high after recording more than 1000% year-on-year growth in profits for the first quarter of FY23. Revenue stood at Rs. 3,604 crores in Q1FY23 compared to Rs. 1,564 crores in the year-ago period. In percentage terms, it’s a 96% jump in revenue. At the time of writing this article, BEL’s share price is a little over Rs. 281.

According to BEL’s annual report for the year FY22, the company received its biggest ever export order from the USA’s Airbus Defence & Space for manufacturing and supply of MAWS&RWR for C-295 Aircraft.

Walking on the Aatmanirbhar Bharat vision, BEL achieved 78% of the total turnover from indigenous products. Indigenous here refers to products manufactured in India using in-house technology and manufacturing capabilities.

together individual man-portable air-defence system operators together into a networked environment.

Bottom line – Should you invest in stock of BEL (Bharat Electronics Ltd)?

While BEL (Bharat Electronics Ltd) has been an outperformer right from its early days and also has an assured market for its products from government’s defence purchases, one should also consider the fact that some PSU’s which earlier had a monopolistic advantage lost their sheen with time after a level playing field was introduced or due to underperformance.

One such prime example is the stock of MTNL, which after failing to bear the onslaught of private sector telecom companies is now languishing in single digits from highs of around Rs.387 levels in its glory days. Many other defence projects of other PSUs have been dogged by excessive budget escalations and huge delays. The best example of this is the light combat aircraft project first conceived in the 1980s to replace the ageing MIG’s in the Indian Airforce but entered service only after four decades and is still powered by American engines.

When you look at the stock of BEL (Bharat Electronics Ltd) from a fundamental point of view, there are some things that tick the boxes right such as consistent dividend to shareholders and visionary management. However, before investing in the shares of BEL or any stock there are several other important factors too which an investor should keep in mind such as return on equity, future growth, profit margins, and BEL’s underlying value and potential for future growth.

For any investor who wishes to create sustainable wealth from equities, the right way to proceed is creating a well-diversified portfolio of 20-25 stocks. That is what successful investors do. Get started with creating a winning portfolio here.

Disclaimer:

The sole objective of this article is to help investors understand whether it is worth investing in BEL (Bharat Electronics Ltd) at this point with a long-term view by evaluating the strengths and weakness of the stock of BEL. This article in no way should be considered as advice to invest in stock of Bharat Electronics Ltd.

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