This PSU defence stock surges 100% so far this year, but why…

Shares of state-owned Bharat Dynamics (BDL) gained more than 8% to hit a fresh all-time high on Monday even as the benchmark Sensex and Nifty reeled under selling pressure. The share of the aerospace and defence company has been gaining for the last four sessions and have rallied as much as 34.3% during the same period.

The BDL share price has surged more than 94% since the beginning of the calendar year 2022 (year-to-date basis) on the back of better than expected quarterly numbers and hopes of securing orders from the defence ministry as the government plans to expand procurement of locally manufactured products. The company has reported positive results for the last two consecutive quarters.

On Monday, BDL shares opened higher at ₹718.70 against the previous close price of ₹716.20 on the BSE. Extending its gaining momentum for the fourth consecutive session, the stock price gained as much as 8.56% to scale a new lifetime high of ₹777.50, driven by heavy volume. In the first three-hour of trade so far, as much as 2.92 lakh shares worth ₹22.04 crore changed hands over the counter as compared to two-week average volume of 1.16 lakh scrip. The market capitalisation of the midcap stock surged to ₹13,963.28 crore. The stock has jumped 140% from its 52-week low of ₹321.50, touched in April last year, while it has soared 54% in the past one month.

Technically, the stock remained in a bullish range, moving away from “mildly bullish” on February 28, 2022, and has risen 67% since then.

Established in 1970, Bharat Dynamics is a defence company and is one of India's manufacturers of ammunitions and missile systems. Recently, the company bagged a contract worth ₹3,131.82 crore from the Indian Army for the manufacture and supply of Konkurs-M anti-tank guided missiles. Besides, it also signed a pact with Tawazun Economic Council (TEC), United Arab Emirates, to explore new business opportunities in various areas of mutual interest in the field of defence.

Investors also turned bullish on the stock after defence minister Rajnath Singh last week unveiled plans to expand procurement of locally manufactured products. On April 7, the government released the third indigenisation list of 101 items, comprising naval utility helicopters, light tanks, small unmanned aerial vehicles, and anti-ship missiles among others, which are likely to translate into firm orders in the next five years. These weapons and platforms are planned to be indigenised progressively with effect from December 2022 to December 2027.

BDL’s robust financial performance during the financial year 2022 also boosted demand for the stock. The company in an exchange filing said it recorded a turnover of ₹2,700 crore (provisional and unaudited) for the financial year ended on March 31, 2022, compared with ₹1,913.76 crore in the previous fiscal. Boosted by strong earnings, the company has paid an interim dividend of ₹7.30 per equity share of ₹10 each for the financial year 2021-22 amounting to ₹133.79 crore.