Home / Markets / Stock Markets /  Debt-free stock jumps 1000 times turning 1 lakh to 50 Cr after 3 bonus shares: Buy?

The industrial company Bharat Electronics Ltd. is a large cap with a market worth of Rs. 81,284.74 crore. A Navratna PSU within the Indian Government's Ministry of Defence is Bharat Electronics Limited (BEL). It produces cutting-edge electronic equipment and products for the Army, Navy, and Air Force. According to Value Research's data, the company is a debt-free company, which is an endearing trait of the stock. However, what makes the stock even more intriguing is the fact that the company has declared three bonus shares, turning investors crorepati in a span of 23 years. Let's know-how.

Share price and bonus share history of Bharat Electronics Limited (BEL)

Bharat Electronics Ltd. shares ended trading on the NSE at Rs. 111.75 a piece, up 0.59% from the previous close of Rs. 111.10. In trade today the total volume recorded by the stock was 27,675,466 shares compared to the 20-Day average volume of 25,560,615 shares. The stock price has skyrocketed from 0.22 as of 1st January 1999 to the current market price which logs in a multibagger return and an all-time high of 50,695.45%.

If from the initial stage of the company, an investor would have invested 1 lakh in the stock then he/she would have 4,54,545 shares in the portfolio. After this company declared 3 bonus issues in the year 2015, in the year 2017 and recently on 15th September 2022. The company issued bonus shares for the first time in the year 2015 in the ratio of 2:1, altering the initial shareholdings of an investor and making the total share count to 13,63,635 making the value rise significantly. 

Not many years later the company again announced the bonus shares but this time to be in the ratio of 1:10, which adds 1,36,363 to the existing shareholding making the count rise up to 14,99,998 making the percentage of holding greater which was proved to be profitable in the year 2017. Recently on 15th September 2022 company gave its most recent bonus share in the ratio of 2:1 which gives the investor additional 29,99,996 shares making the total shareholding to be of total 44,99,994 which is now many times more than the initial shares.

All of the company's bonus issues seem to have been profitable for investors, and the initial investor who decided to stick with the company for a long time made a sizable profit. The initial investment skyrocketed, maximising more than 1000 times, making the total shares of 44,99,994 worth more than 50.28 Crores as of now at the current market price.

Q1FY23 results of BEL

Navratna Defence PSU Bharat Electronics Limited (BEL) reported a turnover of Rs. 3063.58 Cr, during the 1st quarter of FY 2022-23 against the turnover of Rs. 1564.34 Cr recorded in the same quarter of the previous year, representing a YoY growth of 95% on a standalone basis. The company reported a total expense of 2694.42 Cr in Q1FY23 compared to 1664.08 Cr in Q1FY22 representing a YoY growth of 61.91%. Profit Before Tax (PBT) in Q1FY23 stood at Rs. 578.10 Cr against the Profit Before Tax (PBT) of Rs. 15.17 Cr recorded in Q1FY22 and Profit After Tax (PAT) in Q1FY23 stood at Rs. 431.49 Cr against the Profit After Tax (PAT) of Rs. 11.15 Cr recorded in the same quarter of the previous year. The company's earnings per share (EPS) climbed to 1.77 in Q1FY23 which was 0.05 in Q1FY22.

Should you buy the shares of BEL?

The research analysts of the broking firm ICICI Securities said on Thursday in a note that “The company had made an announcement regarding bonus issue on August 4, 2022. The issue of bonus shares is in the ratio of 2:1 i.e. two new bonus equity shares each for every existing equity share. Ex-bonus date is today i.e. September 15 and record date for the same is September 16. Hence, we revise our target price to 135/share post this corporate action. We maintain our BUY rating on the stock and value Bharat Electronics based on 30x P/E on FY24 EPS."

They further added that the company’s 1) strategy to diversify into non-defence areas, focus on increasing exports and services share would aid long term growth and help de-risk its business, 2) order backlog at 55,333 crore as of June 2022 end (~3.3x TTM revenues). Strong order pipeline in FY23-24E, 3) the major orders in the pipeline are: Akash Prime from Bharat Dynamics worth 4,000 crore, Himshakti Electronic Warfare (EW) worth 3,200 crore, Arudhra Radar worth 3,000 crore, EW system for Mi-17 helicopters worth 1,500 crore, electronic warfare systems for ships worth 12,000 crore, 12 weapon detecting radars (WDR) worth 1,000 crore, 4) Major orders expected in FY24E in quick reaction surface-to-air missile (QRSAM) worth 20,000 crore, medium range surface to air missile (MRSAM) worth 15,000-20,000 crore. Army is in process of taking up acceptance of necessity (AoN) post which they will issue RFP after approvals, 5) We expect revenue, EBITDA to grow at a CAGR of 18.5%, 20.1%, respectively, in FY22-FY24E aided by sustained margins in range of ~22% and 6) Strong balance sheet, double digit returns ratios, are the key triggers for future price performance of the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

 

ABOUT THE AUTHOR

Vipul Das

Vipul Das is a Digital Business Content Producer at Livemint. He previously worked for Goodreturns.in (OneIndia News) and has over 5 years of expertise in the finance and business sector. Stocks, mutual funds, personal finance, tax, and banking are among his specialties, and he is a professional in industry research and business reporting. He received his bachelor's degree from Dr. CV Raman University and also have completed Diploma in Journalism and Mass Communication (DJMC).
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