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ICICI Securities Report
Domestic brokerage firm ICICI Securities has maintained its structurally positive stance on the Indian defence sector and expect defence capex to sustain a double-digit compound annual growth rate for the next four-five years; further, with the recent Defence Procurement Manual 2025, acquisition timelines are expected to be significantly compressed.
Given that Defene Acquisition Council (DAC) approvals were at an all-time high in FY26 and continued in Q1 FY27 (Rs 52,000 crore AoN approved), the government's decision to open missile tech to private players validates our earlier stance on disproportionate growth in this segment.
The brokerage believe the order awarding momentum could pick up in FY27/28, especially on the aerospace, missiles, electronic warfare and drone defence/offence sides, as the fabric of warfare has changed over the past couple of years.
The geopolitical backdrop continues to provide a structural tailwind, as the conflict in the Middle East has reinforced defence budget urgency across GCCs.
Indian OEMs with established export track records or MoUs are likely to benefit disproportionality, especially in the areas of missiles, drones, aerospace, defence electronics and radars.
Hindustan Aeronautics and Solar Industries are ICICI Securities' preferred bets with Buy rating. The brokearge also likes Bharat Electronics at current market price.
The brokerage also has Add rating on Azad Engineering and Bharat Dynamics whereas Dynamatic Technologies is a Reduce for the brokerage.
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