Prices of BEL stocks have been consistently rising over the past few years. And this trend continues, given its double-digit growth that grew at a pace faster than its sales.
Take a look at the charts below-
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Even the leading investment advisory services and many experts hold positive sentiment for this stock. Do you want to know why? Then, read this article until the end to find out whether you should buy BEL stocks.
We discuss the advantages and disadvantages of investing in BEL stocks. As a bonus, we have added some tips for smart investment decisions in stock.
Overview of Bharat Electricals Ltd (BEL)
Bharat Electricals Ltd (BEL), a Navratna PSU under the Ministry of Defence with a government stake of 51.14%, has a market capitalization of over Rs. 1 lakh crore as of November 2023. BEL covers everything from Electronic Voting Machines (EVM) to Solar Lanterns, from broadcast and satellite communications to anti-drone systems and advanced defensive equipment.
In recent years, BEL stocks have performed well, with a Y-O-Y growth rate of 15.40% in revenue, 24.40% in net income, and 24.57% in profits per share (EPS) in 2023.
However, investing in BEL stocks, like any other stock, is a medley of rewards and challenges, such as dependence on government orders, competition from domestic and foreign players, and volatility in the defence sector.
Pros of investing in BEL stocks
Strong financial performance
BEL has consistently delivered impressive financial results, with a market cap of Rs. 1,04,457 crores, an ROE of 22.43%, and a P/E ratio of 31.41 against the industry P/E of 34.47. BEL has also been paying regular dividends to its shareholders, with a dividend yield of 1.26%.
Consistent returns of BEL stocks indicate a healthy balance sheet, with a debt-to-equity ratio of zero, which means that the company has no debt in its capital structure. This shows that BEL has a robust financial position and does not face any interest or repayment obligations.
Diversified product portfolio
BEL has a diversified product portfolio, catering to various segments of the defence and civilian sectors. BEL manufactures and supplies different products for both industrial and civilian use.
Everything from domestic devices like solar products and systems to defence weaponry and other business components like satcoms is on the list. It gives BEL stocks a competitive advantage and a basis for a consistent revenue stream from several sources.
Strategic partnerships and collaborations
BEL has established strategic partnerships and collaborations with various domestic and foreign entities, such as the DRDO, the Indian Space Research Organisation (ISRO), the Indian Institute of Science (IISc), the Indian Institute of Technology (IIT), Lockheed Martin, Thales, Airbus, and Boeing.
These partnerships and agreements allow BEL to gain access to breakthrough technology, improve its capabilities, and expand its markets, but they also help BEL stock price rise.
Positive outlook and growth prospects
BEL stocks have a positive outlook and growth prospects, as BEL is well-positioned to benefit from the increasing defence spending and modernization of the Indian armed forces.
BEL has also secured several defence orders worth Rs. 5498 crores from the Ministry of Defence (MoD) in March 2023, fostering the government’s “Make in India” “Atma Nirbhar Bharat Abhiyan” mission. BEL’s book order is almost 2.7 times the revenue earned in FY23.
Cons of Investing in BEL Stocks
High dependence on government orders
BEL derives over 80% of its revenue from the Ministry of Defence (MoD) and other government agencies. It makes the company vulnerable to policy changes, budget constraints, delays, and cancellations of orders by the government.
Furthermore, if the government imposes any price limitations, quality standards, or other laws on the company, it may hurt BEL stocks.
Intense competition from domestic and foreign players
BEL faces stiff competition from other domestic defence companies, such as Larsen & Toubro, Tata Power, and Reliance Defence, as well as foreign players, such as Lockheed Martin, Boeing, and Thales, who are vying for a share of the Indian defence market.
These competitors may have better technology, lower costs, and stronger relationships with the customers, which may negatively affect the prices of BEL stocks.
Cyclical and unpredictable nature of defense spending
The defence sector is highly cyclical and depends on the country’s geopolitical situation, security threats, and strategic priorities.
Moreover, the defence budget and spending may fluctuate depending on economic conditions, political factors, and external events. This may create uncertainty and volatility in BEL stocks.
The Bottom Line
BEL is a leading defence company in India with a track record of delivering products and services to the Indian Armed Forces and other customers. Reading this article must have given you the insights to weigh the pros and cons of investing in BEL stocks.
Still, you can seek any financial advisory services if your mind is clouded with ambiguity.
Now that you’ve decided on BEL stocks let’s talk about some stock investment strategies that most successful investors use. To begin, you should constantly diversify your investments. Second, go over your portfolio frequently. Remember, don’t underestimate the benefits of long-term and patient investing.