India’s Defence Boom: B&K Initiates Bullish Coverage On HAL, BEL Amid Indigenisation Push — Check Target Price

B&K has initiated coverage on three of India’s most strategically important defence companies, Hindustan Aeronautics Ltd., Bharat Electronics Ltd. and Bharat Dynamics Ltd., arguing that the country is stepping into a long-term, technology-heavy modernisation cycle.

The brokerage believes India’s defence and aerospace sector is undergoing a structural transformation driven by intensifying geopolitical tensions, rising warfare complexity, ageing military assets and a sharp policy pivot toward indigenisation.

B&K describes India’s defence-aerospace ecosystem as being at an inflection point, with HAL central to the most significant modernisation cycle in decades. The Indian Air Force’s squadron shortages accelerated retirement of legacy aircraft and the government’s push for indigenous platforms have structurally strengthened HAL’s position.

As the only integrated manufacturer of airborne platforms with deep R&D capability, HAL’s strategic relevance is “higher than ever”. The stock is valued at 34x December 2027 EPS, implying a target price of Rs 5,610 with an upside of 26.3%.

Key risks include execution delays, delivery slippages, increasing private-sector competition and margin pressures.

BEL is positioned at the forefront of India’s electronics-led defence modernisation. The company is the largest integrator of defence electronics in India, with leading positions in radars, communication systems, electronic warfare suites, avionics and C4I systems.

Its diversified portfolio shields it from cyclicality, while its order backlog and opportunity pipeline offer one of the deepest growth funnels in the sector.

B&K assigns 45x December 2027 EPS, resulting in a target price of Rs 513 indicating an upside of 26%.

Risks include rapid shifts in warfare technology and growing private-sector participation.

India’s guided-weapons ecosystem is scaling up rapidly, with modernisation across the armed forces driving demand for missiles, precision weapons and torpedoes. As the country’s largest integrated missile manufacturer and a key partner of DRDO, Bharat Dynamics sits at the core of this expansion.

However, B&K points out that private players are expanding aggressively across propulsion, structures and weapons integration, creating margin pressure. While the industry remains attractive, valuations appear stretched, it added in its report on Tuesday.

B&K assigns 42x December 2027 EPS, implying a target price of Rs 1,406, with a downside of 7% and initiates with a Hold.

Supply-chain headwinds and intensifying competition are key risks.

B&K believes the current cycle is deeper and structurally more durable than previous defence upcycles. India’s defence production has crossed $17.6 billion and is projected to reach $36 billion by 2029.

Large platforms across aerospace, missiles and electronics are simultaneously entering replacement cycles, ensuring visibility for more than a decade.

The broader indigenisation agenda, backed by reforms, industrial corridors, MSME participation, Make programmes and expanding R&D capabilities, has evolved into a full-fledged industrial strategy. This has reduced import dependence and strengthened India’s export-ready ecosystem.

Global dynamics are also favourable. Rising global conflicts, NATO’s increased defence spending and the replenishment of depleted inventories present significant export opportunities.

India’s exports have risen fifteen-fold in eight years, with a target of Rs 500 billion in the next five years, supported by growing traction in missiles, radars and EW systems.