Bharat Electronics Stock Up By 150% In 1 Year: Reasons Behind

Ever since Bharat Electronics stock skyrocketed, the investors’ wealth doubled too! It was up by 150% in the last one year. Can you believe it? Moreover, numerous investing banking and capital market firms like Jefferies India anticipate that Bharat Electronics stock will see 2X growth in the future.

Now the question is why this stock is surging rapidly. What should you do as an investor? Go through this article and you’ll find out!

(A) Reasons Behind Bharat Electronics Stock Rally

The following subsections describe some of the potent reasons behind the exponential rise of Bharat Electronics stock-

(A.1) Healthy Financial Performance

First off, let’s talk numbers. BEL has been on a financial roll lately. You know, they reported some stellar results in recent quarters. In Q4 FY2024, the company saw a 26% year-over-year increase in revenue and a 32% jump in net profit. These gains were fueled by robust order execution and enhanced operational efficiency.

For the full fiscal year of 2024, BEL’s total income stood at a massive Rs.209.4 billion, marking a 17% increase compared to the previous year. This surge wasn’t just about the core business; other income spiked by 139%, which significantly boosted their overall earnings. Net profit?

That soared too, by an impressive 34%, reaching Rs.39.4 billion. This profitability was driven by rising revenues and a strong backlog of orders, ensuring steady production throughout the year.

Oh, and guess what?

They also declared a final dividend of 80%, amounting to Rs.0.8 per equity share for FY2023-24. Clearly, BEL’s financial health is rock solid, and investors love that!

(A.2) New Contracts and Technological Advancements

BEL’s knack for bagging big contracts has been a major growth driver. Recently, they secured a significant Rs.2,167 crore deal with the Indian Navy for supplying an indigenously developed electronic warfare suite. Such wins not only bolster their order book but also inspire investor confidence.

Moreover, BEL’s investment in research and development is paying off. They are constantly pushing the envelope in defense electronics and systems, ensuring they stay ahead of the curve. This technological edge helps them win more orders from the Indian military, further strengthening their market position.

(A.3) Favorable Government Policies and “Make in India” Initiative

The Indian government’s push for self-reliance in defense manufacturing, under the “Make in India” initiative, has been a game-changer for BEL. As a leading domestic manufacturer of defense electronics, BEL has seen a surge in demand for its products and services.

Not only is BEL benefiting from defense contracts, but they’re also diversifying into non-defense sectors and ramping up exports. This strategy is crucial for long-term growth and risk management. However, there’s a word of caution: while the current order book looks promising, BEL’s future success will depend on securing new contracts beyond the current defense spending boom and successfully navigating the competitive export market.

(A.4) Positive Market Sentiment and Elliott Wave Theory

Let’s talk about the stock market dynamics. BEL’s strong financial performance and new contract wins have created a positive buzz in the market. This has attracted investor interest and increased buying pressure, pushing the stock price higher.

Looking at the price charts, BEL has been on a long-term uptrend, hitting fresh all-time highs consistently over the last five months. The Supertrend indicator recently triggered a bullish signal on the daily charts, adding to the positive sentiment.

Now, if you’re into technical analysis, here’s something mind-blowing fact. According to Elliott Wave Theory, BEL’s stock is currently in the third wave of an impulsive structure, which started from a low of Rs.18.65 in March 2020. The third wave is typically the strongest, and it has been fueling this rally, extending it closer to 461.8% of the wave 2 correction.

(A.5) Strong Order Book

BEL’s order book is another pillar of its success. In FY24, the company secured contracts worth approximately Rs.350 billion, including critical defense equipment like electronic fuzes, radars, communication systems, fire control systems, sonars, and tactical communication systems.

They didn’t stop at defense. BEL also ventured into non-defense projects, adding a diversification angle to its portfolio. As of April 1, 2024, their order book stood at a hefty Rs.760 billion.

On the export front, BEL has been killing it too. Export sales surged by 92% to around USD 93 million in FY24. Key export products included transmit and receive modules, advanced stabilization systems, radar and electronic warfare systems, medical electronics, and communication equipment. The export order book as of April 1, 2024, was USD 407 million, with new export orders worth USD 211 million secured during the year.

BEL anticipates continued order momentum in the coming financial year, driven by the government’s focus on strengthening the defense sector. The order backlog is estimated to be around Rs.73.5 billion, ensuring a steady flow of business and revenue.

As BEL continues to capitalize on defense spending and diversify into new sectors, it seems well-positioned for sustained growth. Whether you’re an investor, a market enthusiast, or just someone curious about business dynamics, BEL’s story is a fascinating example of strategic growth in action.

Note: Recently, the Indian stock market witnessed the rally of the following stocks-

(B) What should investors do?

When dealing with Bharat Electronics stock, investors might be wondering whether to buy, sell, or hold. Are you one of those? If yes, then go through the following cases-

Case 1: For Current Investors who want to Hold the stock

If you already own Bharat Electronics stock, here’s what you need to know-

Current Position: The stock prices are in the final stages of completing the 3rd wave. This stage is critical as multiple divergences between the prices and the Relative Strength Index (RSI) suggest caution.
RSI Indicator: The daily RSI is at 69.7. RSI is a momentum indicator that signals whether a stock is overbought or oversold. An RSI below 30 is considered oversold, indicating a buying opportunity, while an RSI above 70 is overbought, signaling a potential selling point. At 69.7, the stock is nearing overbought territory, meaning the prices might be high relative to their historical averages.
MACD Indicator: The daily Moving Average Convergence Divergence (MACD) is above its center and signal line. This is a bullish indicator suggesting that the stock’s upward momentum is likely to continue in the short term.
Stop Loss Recommendation: Thukral, an expert, advises investors to tighten their stop losses below Rs.215 on a weekly closing basis. This level represents the previous swing high and acts as a safety net to protect your gains if the stock price drops.
Profit Potential: If the breakout continues the 3rd wave rally, the prices are expected to stay above Rs.215, allowing you to maximize your profits in a trending stock.

Case 2: For Potential Buyers

If you’re considering buying Bharat Electronics stock, here’s the expert advice-

Avoid Fresh Buying: The stock is showing multiple divergences, where prices are making new highs but the RSI is making lower highs. This is typically a signal that the upward momentum might not be sustainable, and fresh buying is not recommended at current levels.
Profit Booking Level: Thukral suggests that traders think about booking profits around Rs.230. This level might represent a peak in the current trend, making it a strategic point to sell.
Demand Zone for Buying: There’s a strong demand zone between Rs.180-Rs.190. If the stock price corrects and moves sideways, this range could provide a good buying opportunity. This means waiting for the price to drop to this level before buying to get a better value.

Case 3: For Sellers

If you’re considering selling Bharat Electronics stock, here’s what you should consider-

Current Price Levels: With the stock prices nearing the completion of the 3rd wave and the RSI close to the overbought zone, it might be a strategic time to sell.
RSI and MACD Indicators: The daily RSI is at 69.7 and a bullish MACD suggests the stock might be reaching a peak. The divergences indicate potential volatility, making it wise to consider selling.
Profit Booking: Experts recommend considering profit booking around Rs.230. If the stock reaches this level, it might be a good time to sell and lock in your gains.
Stop Loss Strategy: If you decide to hold on to the stock, maintain a stop loss below Rs.215 to protect your profits against any potential declines.

In short, for current investors, it’s essential to hold the stock with caution, set stop losses, and aim to maximize profits if the stock stays above Rs.215. Potential buyers should wait for a better entry point around Rs.180-Rs.190 instead of buying at current levels. For those considering selling, the Rs.230 mark is an ideal point to lock in profits, but if you hold, ensure you have a stop loss set below Rs.215 to safeguard your gains.

Thus, by understanding these key indicators and expert recommendations, you can make a more informed decision on how to manage your investment in Bharat Electronics stock!