Brokerage firm Motilal Oswal maintained its “buy” recommendation on four Indian defense companies, Bharat Electronics (BEL), Hindustan Aeronautics (HAL), Bharat Dynamics (BDL) and Astra Microwave, with an increase of up to 38%, in its note on Tuesday, March 10.
(Photo credit: The Turkish Ministry of National Defense reported no casualties in the downing of the missile. [File: Khalil Hamra/AP Photo])
The brokerage said the ongoing West Asia conflict is likely to drive higher global defense spending as nations prioritize security and military readiness. He added that India’s defense sector is well positioned to benefit from both increased domestic procurement and growing export opportunities, supported by the government’s drive for indigenization and a growing reputation in the global arms market.
Motilal Oswal also warned that in the short term it will be alert to supply chain constraints, particularly related to specialized components and imported subsystems, which could affect the execution schedules of certain defense platforms.
Feedback from management at major defense companies points to strong visibility for order completion over the next 15 to 18 months, supported by large programs named in advanced stages. Based on this, he has recommended buying these four companies:
Bharat Electronics | The company has highlighted near-term opportunities including LCA Mk-1A systems, Shatrughat EW, next-generation Corvettes and expected QRSAM entries worth nearly Rs 30,000 crore. Motilal Oswal’s ‘buy’ rating on the stock values it at 45 times two-year forward earnings and his target price of ₹520 implies 14% upside potential from current levels.
Hindustan Aeronautics | The company is expected to start delivering the Tejas Mk-1A and has secured orders such as the Dornier-228, Dhruv-NG and ALH Mk-III. The stock has declined significantly from its previous peak and Motilal Oswal’s price target of Rs 5,500 implies an upside potential of 38% from current levels, 30 times two-year forward earnings.
Bharat Dynamics | The company is targeting orders worth nearly Rs 20,000 crore over the next 18 months from a Rs 50,000-crore pipeline, backed by advanced testing of Akash-NG and other missile systems, says Motilal Oswal. The brokerage has a target price of Rs 1,800, implying a potential upside of 35% from current levels, based on 42 times two-year forward earnings.
Astra Micro | Motilal Oswal said Astra Micro remains well positioned for QRSAM and EW-linked electronics opportunities, which, in the long term, could be worth nearly Rs 25,000 crore. The Rs 1,150 price target for the stock implies an upside potential of up to 15%, based on 38 times two-year forward earnings.