Top Defence Stocks to Buy: On Tuesday, the Sensex closed at 78,472.87, while the Nifty 50 ended at 23,727.65, marking a positive trend. According to Zeebiz, Elara Capital has released a report highlighting strong order inflows for the defense sector, predicting a surge in Q4. This makes it a prime time to focus on defense stocks, especially as a significant portion of the defense capital expenditure for FY25 is expected to be completed in Q4. With a favorable demand outlook for the next 2-3 years, Elara Capital recommends investing in Hindustan Aeronautics, Bharat Electronics, Bharat Dynamics, and Garden Reach Shipbuilders.
As per Mint, Phillip Capital also shares a positive outlook on the defense sector, noting that defense companies benefit from solid financial health, characterized by cash-rich balance sheets and minimal working capital challenges, thanks to stage payments. The sector’s growth is supported by government policies that prioritize local manufacturing, strategic partnerships, and import restrictions, all of which strengthen the domestic defense ecosystem.
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The brokerage firm forecasts margin expansion in core defense products, driven by operational efficiencies and the government’s indigenization mandate. They maintain a “Buy” rating on Bharat Electronics (BEL), Hindustan Aeronautics (HAL), and Data Patterns, while giving a “Neutral” rating on Solar Industries India and Bharat Dynamics.
Stock Recommendations and Target Prices
Bharat Electronics (BEL)
With a 60% market share in the defense electronics space, BEL has a strong order backlog of ₹75,900 crore and a pipeline of ₹80,000 crore, ensuring strong revenue visibility. Phillip Capital assigns a target price of ₹390, with a “Buy” rating.
Hindustan Aeronautics (HAL)
HAL’s growth prospects are bolstered by a ₹5 lakh crore opportunity over the next eight years. Phillip Capital assigns a “Buy” rating and a target price of ₹5,500.
Data Patterns
Known for its niche capabilities in radars and other defense sub-systems, Data Patterns is expected to achieve a CAGR of 26% over FY24-27. The firm assigns a “Buy” rating with a target price of ₹3,140.
Solar Industries
Solar Industries is expected to see strong growth in explosives and defense products, with a revenue CAGR of 26% and EBITDA CAGR of 31%. The firm has a “Neutral” rating and a target price of ₹12,000.
Bharat Dynamics
With strong growth prospects from indigenization and increased orders, Bharat Dynamics is expected to achieve a revenue CAGR of 24%. However, its current valuation reflects these positives, so Phillip Capital gives it a “Neutral” rating and a target price of ₹1,400.
These stocks are seen as solid investments within the growing defense sector, benefiting from both government policies and a positive demand outlook.
