Stock Split Alert: Miniratna PSU Announces First Ever Stock Split

The Indian stock market has been on a tear. The Sensex has surged 92% in the past five years.

This bull run has driven the share prices of many companies upwards, making them desirable investments.

But soaring stock prices can also make them less accessible to some investors.

While the company might be highly desirable, the hefty price tag of the stock, excludes a large portion of potential investors who simply can't afford such a steep entry point.

This is where stock splits come to the rescue. A stock split is a company's way of making its shares more affordable.

By dividing existing shares into smaller denominations, the company increases the number of outstanding shares while maintaining its overall market value.

With this context in mind, we have some exciting news for investors seeking such an opportunity.

Bharat Dynamics, a leader in the Indian defence sector, has announced a stock split plan.

• Bharat Dynamics on 21 March 2024, approved the stock split in the proportion of 1:2. This means splitting one equity share of the face value of Rs 10 each fully paid up into two equity shares of the face value of Rs 5 each fully paid up.
• The face value will be cut from Rs 10 to Rs 5 per share.
• The stock split aims to comply with DIPAM guidelines on capital restructuring, encourage wider participation of small investors, and enhance the liquidity of the company's shares in the stock market.
• The record date for the stock split is set as 24 May 2024.

This is the first time the company has announced a stock split. Before this, the company has not carried out any major corporate actions.

Order Book and Recent Development

According to Bharat Dynamics' investor presentation, the company received orders worth Rs 17.2 billion (bn) from 1 April 2023 to 31 December 2023.

These orders included anti-tank missiles, Akash missile upgrades, light battlefield rocket launchers, and ultra-light polygon-guided missiles.

Further, in February 2024, the company secured a significant export order worth Rs 21.1 bn.

As of 1 April 2024, Bharat Dynamics reportedly had a robust order book of around Rs 194.7 bn. This strong order book signifies healthy revenue visibility for the company.

A Close Look at the Financials

Between FY21 and FY23, the company posted a CAGR growth of 9.1% in its revenue.

Along with the revenues, the net profits have also increased by a CAGR of 10.4% during the last three financial years.

However, there was a slight decline in revenue growth in 2023, at 11.6% to Rs 248.9 bn. Net profit followed a similar trend, decreasing 28.6% to Rs 3.5 bn.

As per the company's reports, the reason for the declined revenues and profit was delays in obtaining crucial electronic components and explosive materials from foreign original equipment manufacturers (OEM) which resulted in non-completion of scheduled production.

Bharat Dynamics Financial Snapshot (2018-22)

Particulars	31-Mar-21	31-Mar-22	31-Mar-23
Total Revenue (Rs in bn)	191.4	281.7	248.9
Revenue Growth (%)	-	47.2	11.6
Operating Profit Margins (%)	12.9	21.3	16.4
Net profit (Rs in bn)	2.6	4.9	3.5
Net profit margin (%)	13.5	17.7	14.1

Source: Equitymaster

The ROE of the company also saw a decline from 17.49% in FY22 to 11.28% in FY23.

The main reason was the lower turnover on account of supply chain disruptions and changes in product mix. The company's debt-to-equity ratio is zero.

What Next?

Bharat Dynamics envisions a substantial expansion of its order book, targeting an additional order inflow of around Rs 250 bn over the next 2 to 3 years.

In its commitment to innovation, Bharat Dynamics Limited plans to allocate 2-4% of sales for research and development (R&D) investment.

The company planed strategic investments of Rs 1 bn, in infrastructure and development projects.

Aligned with the government's emphasis on self-reliance, BDL has made significant strides by establishing facilities for warhead and seeker manufacturing.

The ongoing construction in the UP-defence corridor underscores BDL's commitment to indigenisation, aiming to produce GRAD rockets and propellants for advanced ATGMs.

With a robust order book, increasing international demand, and a focus on technological advancements, BDL is poised to emerge as a global leader in missile and weapon system manufacturing in the coming years.

How Shares of Bharat Dynamics have Performed Recently

The share price of Bharat Dynamics has climbed by 24.5% in the past one month.

Over the past one year, shares of the company have rallied 90%. In the past five years, shares have delivered multibagger returns of over 225%.

The company touched its 52-week high of Rs 1,492.3 on 16 May 2024 and its 52-week low of Rs 752.9 on 19 May 2023.

About Bharat Dynamics

Bharat Dynamics is one of India's manufacturers of ammunitions and missile systems.

The company was established in the year 1970 to be a manufacturing base for guided weapon systems.

Starting with a pool of engineers drawn from Indian ordnance factories, DRDO and aerospace industries, Bharat Dynamics began by producing a first generation anti-tank guided missile - the French SS11B1.

This product was a culmination of a license agreement the government of India entered into with Aerospatiale.

It has three manufacturing units, located at Kanchanbagh, Hyderabad Bhanur, and Visakhapatnam.

Two new units are planned at Ibrahimpatnam, in Ranga Reddy district, Telangana and at Amravati, Maharashtra.

For more details about the company, you can have a look at Bharat Dynamics factsheet and quarterly results on our website.

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