Nuvama Sees Defence Upswing, Initiates Buy Calls On HAL, Data Patterns And Bharat Dynamics

India's defence players are picking up steam, providing a good opportunity to engage with the sector, says Nuvama Institutional Equities, initiating coverage on some major players in the space. The company initiated a buy call on Hindustan Aeronautics Ltd., Bharat Dynamics Ltd., and Data Patterns (India) Ltd.

The initiation marks the highest target price received by Bharat Dynamics.

The brokerage also retains its positive stance on Bharat Electronics Ltd. with a revised price target of Rs 385, Solar Industries Ltd. with a price target of Rs 13,750, and Zen Technologies Ltd. with a price target of Rs 1,850.

In its latest sector report, Nuvama pegs the five-year defence opportunity at a hefty $130 billion, with a bulk of the action skewed toward the Air Force and Navy.

The brokerage sees massive upside in homegrown players, especially in the defence electronics segment, which is expected to grow at 1.5-2 times the pace of defence capex growth (7–8% CAGR over the next five years). This tailwind is driven by ongoing modernisation programmes across the Air Force and Navy, including radar systems, electronic warfare suites, AESA radars, and mission-critical avionics.

The brokerage forecasts India's shift from being the world's second-largest arms importer to a self-reliant exporter, with production targets of Rs 3 lakh crore and exports of Rs 50,000 crore by fiscal 2029.

Nuvama is particularly bullish on the private sector's growth trajectory, projecting earnings which are significantly higher than those expected for public sector undertakings.

This is attributed to faster execution cycles, higher return ratios, and better top-line-led earnings momentum.

Nuvama makes a case for Bharat Electronics to continue trading at a premium to Hindustan Aeronautics, noting that while the latter enjoyed a premium owing to large orders and a high-margin MRO business, the shift in revenue mix toward lower-margin product segments could compress its profitability going forward.

As NATO ramps up its defence spending to 800 billion euros amid reduced US support, Nuvama sees Indian private firms—already contributing 60–65% to exports—playing a bigger role in filling the West's supply chain gaps.