India's Defence Story Strong: Garden Reach Shipbuilders, HAL Shares Among Top Picks
Order inflow is expected to increase in calendar year 2025, according to analysts.
India's defence sector's outlook remains strong because of focus on indigenisation and exports, according to brokerages and analysts. Ongoing geopolitical turmoil across the globe and upcoming Trump administration will create a situation where India can ramp up domestic production in the face of supply-chain disruption.
Brokerages remained positive on Garden Reach Shipbuilders Ltd., Bharat Electronics Ltd., Hindustan Aeronautics Ltd., and Data Pattern India Ltd.
Defence Outlook For 2025
Nuvama sees defence sector in the country growing steadily with a skew towards air force and navy. Supply chain remains a key variable given uncertainty unfolding in Bangladesh, Syria, and now South Korea besides Russia-Ukraine and Middle East.
India's cooperation with the US is expected to improve with the Donald Trump taking the oval office in January, Nuvama said.
Elara Capital expects order inflow in the defence sector to increase sharply in financial year 2025 as India tries to meet the defence capital expenditure target. The share of defence spend in April-October stands 36% lower on the year.
Hence, order inflows are expected to be announced in the fourth quarter of the financial year 2025. The order inflow may include imports of Rafale-M ($4 billion) and MQ-9B drones ($3 billion) along with domestic orders for next-generation Corvettes ($360 billion), Elara Capital said in a note.
Moreover, recent stock price correction across defence sector creates a potential for an upward momentum given the mounting growth story with the Government of India's ambitious target of Rs 50,000 crore exports and Rs 3 lakh crore defense production by 2030, according to Nuvama.
Elara Capital's Top Picks
Maintain 'buy' on Hindustan Aeronautics Ltd., with a target price of Rs 5,465, which implied a 29.31% upside.
Maintain 'buy' on Bharat Electronics Ltd. with a target price of Rs 345, which implied a 17.21% upside.
Revise Bharat Dynamics to 'Accumulate' from 'Buy' with a target price Rs 1,300, which implied a 5% upside.
Maintain 'Accumulate' on Garden Reach Shipbuilders, with a target price Rs 1,660 which implied a 6% upside.
Nuvama's Top Picks
Keep a 'Buy' on Bharat Electronics Ltd. with Rs 345, which implied an upside of 21.63%.
Data Pattern India Ltd. is one of the top picks with Rs 2,734, which implied a 10.21% upside from Friday's closing price.
