1:2 Split, 88.5% Dividend: BUY Zero Debt Defence PSU Stock BDL For 18% Potential Gains, TP Cut To Rs 1,579

 After zero-debt defence PSU giant, Bharat Dynamics reported below estimates Q1 earnings, the brokerage Antique Stock Broking has trimmed its target price on its stock to Rs 1,579 from earlier Rs 1,643. However, Antique maintains BUY recommendation as BDL on expectations of turnaround from supply chain challenges, in the second half of FY25.

BDL recently carried a 1:2 stock split and rewarded investors with an interim dividend of 88.5% worth Rs 8.85 per share for FY25.

Currently, the stock is at Rs 1336.20 apiece with a market cap of Rs 48,980.08 crore. 

The stock's 52-week high and low is at Rs 1,794.70 apiece and Rs 450.50 apiece. 

With 138% year-on-year gains, BDL is a multi-bagger stock, and there is further potential for an 18% upside. 

In its latest report, Antique Stock Broking said, "Bharat Dynamics' (BDL) 1QFY25 results stood below our estimates. Supply chain issues pertaining to certain electronic components have hampered BDL's performance over the past seven quarters. However, these issues seems to be receding and we can expect normalization of supply from overseas vendors from 2HFY25 onwards."

Additionally, the brokerage said, BDL is also planning to indigenize the critical component ecosystem so as to avoid over reliance on foreign vendors.

Antique Stock Broking believes that BDL has the capability to execute its existing large order backlog of INR 190 bn as supply chain issues are sorted. Also, BDL being DRDO's production partner, it will maintain a steady inflow of orders leading to further build-up of a robust order backlog. Exports, which are 13% of the order book currently, have the potential to grow meaningfully as the Cabinet Committee on Security has approved the export of Akash missiles to nine countries.

Antique Stock Broking believes that BDL has the capability to execute its existing large order backlog of INR 190 bn as supply chain issues are sorted. Also, BDL being DRDO's production partner, it will maintain a steady inflow of orders leading to further build-up of a robust order backlog. Exports, which are 13% of the order book currently, have the potential to grow meaningfully as the Cabinet Committee on Security has approved the export of Akash missiles to nine countries.

On valuation, the brokerage said, "We, therefore, continue to maintain an optimistic stance on the stock and retain BUY rating with a revised target price of INR 1,579 (45x 1HFY27E EPS; earlier INR 1,643) as we scale down our earnings by 20%/ 8%/ 1% for FY25/ 26/ 27 respectively to factor in the near-term supply chain challenges."