Defence stocks have been in focus this week as the defence ministry approved the procurement of military equipment and weapons worth ₹84,328 crore spread across Air Force, Navy, Army and Coast Guard. This includes light tanks, anti-ship missiles, long-range guided bombs and next-generation offshore patrol vessels.
The details pertaining to category-wise breakup, timelines and contract are not available.
Brokerage house ICICI Securities believes given the recent skirmish on the north-eastern border, the execution is likely to be expeditious.
As per the brokerage, the primary beneficiaries, among its coverage companies could be Bharat Dynamics, Solar Industries and GRSE led by their focus on missile systems, explosives and next-generation offshore patrol vessels. Besides, companies into radar systems and telemetry such as BEL are also likely to benefit from capital spending on surveillance systems, it added.
Bharat Electronics: The brokerage has a 'buy' call on the stock with a target price of ₹125, indicating a potential upside of 26 percent. It has risen 46 percent in 1 year and over 200 percent in 3 years. Just in 2022, it has advanced 42 percent. The firm manufactures and supplies electronic equipment and systems to the defense sector as well as for non-defense market.
Solar Industries: The brokerage has a 'buy' call on the stock with a target price of ₹4,760, indicating a potential upside of 16 percent. The stock has risen 74 percent in the past 1 year and 290 percent in 3 years. Just in 2022, it has gained 69 percent. Solar Industries India is an India-based manufacturer of industrial explosives for the mining and infrastructure sector. It also offers industrial explosives and defense products.
Bharat Dynamics: The brokerage has an 'add' call on the stock with a target price of ₹1,100, implying a potential upside of 22 percent. It has given multi-bagger returns of ₹138 percent in the past 3 years. In 2022 alone, it has rallied 132 percent. Bharat Dynamics engages in the manufacturing and sale of guided missiles and allied equipment in India. It provides surface-to-air, air-to-air, and anti-tank guided missiles, as well as underwater weapons. The company offers its products to the Indian armed forces and the Government of India and was incorporated in 1970.
Garden Reach Shipbuilders & Engineers (GRSE): Even though the brokerage believes the stock will benefit from the recent defence order, it has a 'sell' call on the stock with a target price of ₹390, implying a downside of 14 percent. The sell recommendation comes on the back of its recent surge. Just in 2022, it has rallied 105 percent, giving multi-bagger returns. The firm engages in the design and construction of warships in India. It was incorporated in 1934 and is based in Kolkata, India.
The brokerage believes the benefit is likely to be the most for 1) Bharat Dynamics and Solar Industries for missile systems and long-range guided bombs (explosives); 2) GRSE for NGOPV; and 3) BEL for surveillance systems. Besides, L&T is likely to benefit from light tank and TASL and Bharat Forge from FICV orders, it added.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
