According to analysts, many defense production organizations are nonetheless trading at 18–22 instances their expected profits for economic yr 2026 (FY26E). This is regardless of those businesses having lengthy-time period visibility, making the most of structural changes within the zone, and dealing with high era and scale entry boundaries.
The Indian authorities improved recognition on indigenization of defense manufacturing and better capital expenditure (capex) within the region have resulted in a considerable surge in defense stock values. Order books for businesses in the protection sector have also multiplied extensively.
Antique Stock Broking believes that sectors consisting of industrial, protection, and railways hold multi-12 months investment capability. The corporation said, “There is exceptional increase in funding inside the railway and protection sectors. We trust that the authorities attempt is to growth capital expenditure at the same time as keeping sales expenditure underneath manage to control the deficit.”
The protection equipment quarter has undergone great transformation and is predicted to attain a compound annual growth fee (CAGR) of sixteen% in sales and 13% in income. The brokerage report reiterated that in spite of these positive developments, most protection manufacturing corporations are nonetheless buying and selling at 18–22 instances FY26E profits.
1.Hindustan Aeronautics (HAL)| Buy | TP: ₹2,590
Antique Stock Broking is of the opinion that Hindustan Aeronautics (HAL), thanks to its promising long-term business outlook and impressive execution capabilities, is poised to achieve an 11% earnings Compound Annual Growth Rate (CAGR) between FY23 and FY26E.
They expressed, “Considering the potential for sustained double-digit earnings growth over multiple years and a robust return ratio exceeding 20%, we find the stock to be attractively valued.”
The brokerage has assigned a ‘Buy’ rating to HAL’s stock, setting a target price of ₹2,590 per share. This projection implies a significant upside of more than 37% compared to Tuesday’s low price. Additionally, HAL’s formidable order book, currently standing at ₹820 billion, ensures revenue visibility that exceeds three times the Trailing Twelve Months (TTM) revenue.
2.Bharat Electronics (BEL)| Buy | TP: ₹161
Analysts have noted that Bharat Electronics (BEL) has strategically positioned itself for sustained growth over the years. They have achieved this by establishing a robust infrastructure, cultivating strong relationships with government entities, and diversifying into non-defence sectors, thus creating new avenues for expansion.
In FY23, BEL reported an impressive order inflow of ₹203 billion, bolstered by orders such as the increased Akash weapons order from BDL and others. Presently, their order backlog stands at ₹687 billion, providing a revenue visibility that exceeds 3.8 times their Trailing Twelve Months (TTM) revenue. For FY24E, BEL has indicated its anticipation of order inflows exceeding ₹200 billion, primarily driven by substantial orders.
Bharat Electronics has consistently achieved operating margins of 20% or more by elevating the level of indigenization and nurturing local supply chains. Their guidance includes an operating margin range of 21% to 23%, which is expected to benefit from improved gross margins due to easing input prices, increased operating leverage driven by a projected 15% revenue growth, and enhanced indigenization efforts.
Antique Stock Broking has maintained its ‘Buy’ recommendation for BEL’s stock, with a target price of ₹161 per share.
3.Mazagon Dock Shipbuilders | Buy | TP: ₹2,774
Antique Stock Broking maintains a positive outlook on Mazagon Dock Shipbuilders. They anticipate a 27% capacity utilization in submarines until FY25E based on the current order backlog. However, there is the potential to increase utilization to 81% with the possibility of securing new orders, such as P75I.
Additionally, there are substantial non-submarine contracts valued at ₹1.3 lakh crore, where the company is well-positioned to win repeat orders, including those for P17A and NGD. Moreover, there are orders for medium-life refits exceeding ₹100 billion, which will ensure steady repair revenue, as highlighted by the brokerage.
By factoring in three units of the Scorpene class add-on orders, the brokerage projects a Compound Annual Growth Rate (CAGR) of 21% for revenue and 22% for net profit over the period from FY23 to FY26E. While margins were favorable in FY23, there may be a potential decline in FY24, according to their assessment.
Antique Stock Broking maintains their ‘Buy’ rating for Mazagon Dock Shipbuilders’ stock, setting a target price of ₹2,774 per share. This projection suggests a potential upside of 33% from Tuesday’s low price.
4.Bharat Dynamics(BDL) | Buy | TP: ₹1,430
Bharat Dynamics (BDL), India’s primary and exclusive manufacturer of specific missiles, is poised to sustain its robust order book momentum. This is driven by India’s substantial emphasis on advancing its indigenous missile development program.
As the designated production agency for the Defense Research and Development Organization (DRDO), Bharat Dynamics is anticipated to maintain a consistent flow of orders, ensuring uninterrupted growth. The company boasts a long-term order pipeline exceeding ₹500 billion, ensuring a high level of revenue visibility.
Exports, which currently account for 5% of its revenue, hold significant growth potential. The Cabinet Committee on Security has granted approval for the export of Akash missiles to nine countries, indicating a promising export avenue. Bharat Dynamics aims to achieve 25% of its revenue from exports in the medium to long term, as indicated by the brokerage.
With strong demand for missiles within India and a substantial international export market, Bharat Dynamics is anticipated to deliver robust operational performance throughout FY23-26E.
The brokerage has assigned a ‘Buy’ rating to Bharat Dynamics, with a target price of ₹1,430 per share.
5.Garden Reach Shipbuilders & Engineers | Buy | TP: ₹993
Garden Reach Shipbuilders & Engineers (GRSE) has the potential to elevate its execution capacity to ₹50 billion per annum. This augmentation is expected to facilitate the acceleration of its net profit to ₹5 billion by FY25E.
However, in the pursuit of this growth trajectory, GRSE’s reliance on subcontractors such as L&T could introduce fluctuations in margins. In light of this, Antique Stock Broking maintains a ‘Buy’ recommendation with a target price of ₹993.
Antique Stock Broking envisions Garden Reach Shipbuilders & Engineers achieving revenues of ₹33 billion in FY24E and ₹47 billion in FY25E. The execution phase carries higher upside risks, especially since a significant portion of the vessels falls within the 40%-60% physical progress range, where a substantial portion of execution is expected within the construction bell-curve.
The brokerage anticipates GRSE to achieve a 35% Compound Annual Growth Rate (CAGR) in revenue and a 31% CAGR in net profit during FY23-25E. It is important to note, though, that potential delays in the execution of frigate orders, large survey vessels, and ASW (Anti-Submarine Warfare) vessels represent key risks.
The brokerage maintains its ‘Buy’ rating for GRSE’s stock, with a target price of ₹993 per share.
Disclaimer
The records supplied in this composition is for instructional functionsonly.The stock request, which include futures buying and selling, involves essential pitfalls, and it’s critical to geste thorough exploration and recall your profitable conditions and peril forbearance before making any investment picks.
2 thoughts on “Stocks to Buy-Top 5 Defense Stocks to Consider HAL, Bharat Electronics, and Mazagon Dock Antique Broking’s Picks”