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PSU Stocks: Brokerage firm CLSA has downgraded Bharat Electronics' rating from 'buy' to 'outperform'. This is one of the first declines in the shares of public sector undertakings (PSUs) after the disappointing results of the Lok Sabha elections. After the Lok Sabha election results came out on Tuesday, June 4, there was a huge sell-off in the shares of these government companies. On Tuesday, Bharat Electronics i.e. BEL's shares also fell by 19%. Another brokerage firm MK also advised investors in a note on Tuesday to move away from PSU companies to defensive sectors like FMCG.
However, CLSA has raised its target price on Bharat Electronics from Rs 207 to Rs 294. The brokerage has written in its note that due to expensive valuations, there is very little scope for execution errors in such companies.
Following Tuesday's decline, the one-year forward price-to-earnings multiple of Bharat Electronics stock fell to 35.19 times, which is still higher than its trailing 5-year average multiple of 31.6 times.
CLSA also expects the NDA government to continue to push for 'Make in India' in the defence sector during its third term and go ahead with procurement of Indian-made products worth $43 billion approved by the Defence Performance Council in FY24. Further, CLSA also retained its “outperform” rating on Hindustan Aeronautics with a target price of Rs 4,731.
Meanwhile, Bharat Electronics shares were trading down 6.18 per cent at Rs 239.75 on NSE around 10 am. These shares have fallen by about 25 per cent in the last 2 days. However, since the beginning of this year, the company's shares have risen by about 28.39 per cent.
At that time, Hindustan Aeronautics shares were trading at Rs 4,009, down 7.48 per cent. A day earlier on June 4, Hindustan Aeronautics also fell by 17%. However, since the beginning of this year, this share has increased by about 41.42 per cent.