- India's defence stocks have high valuations backed by long-term growth prospects
- Order books in the defence sector are at peak levels with revenue visibility till 2032
- Leading defence firms expected to grow revenue at about 15% CAGR, supported by orders
India's defence stocks may no longer be bargain buys, but their lofty valuations are backed by an unusually long growth runway, according to Mirae Asset Sharekhan. “The defence sector has always been a long-term growth story,” said Ankit Soni, AVP-Fundamental Research, in an interview with NDTV Profit. “Order books are at peak levels right now, and revenue visibility extends all the way to 2032.”
That visibility, he said, explains why investors continue to assign premium valuations to the sector despite a sharp run-up in stock prices over the past few years.
Soni expects leading defence companies under his coverage to deliver around 15% compound annual growth in revenue over the coming years, supported by strong order books and improving execution. “Any sort of execution delay is the only major risk,” he said.
Even so, Soni believes both Bharat Electronics Limited and Hindustan Aeronautics Limited are well placed to sustain growth, with some potential for margin improvement as deliveries scale up.
BEL and HAL Remain Top Picks
Among listed defence names, Soni said BEL and HAL remain Mirae Asset Sharekhan's preferred bets. BEL has continued to deliver broadly in line with management guidance, backed by a diversified product mix and consistent execution. HAL, meanwhile, could see renewed investor interest if it successfully ramps up deliveries of the Tejas Mark-1A fighter aircraft.
“The key monitorable for HAL will be execution of the Tejas Mark-1 deliveries,” Soni said. Management has indicated that deliveries should begin accelerating from August or September, which could serve as a meaningful trigger for the stock.
While some investors worry that defence stocks have entered “stratospheric” territory, Soni believes valuations still reflect genuine earnings visibility rather than pure speculation.
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