Emkay Global on Tuesday said the domestic defence sector is well-poised to deliver sustained growth in coming years, supported by continued policy support, increased private-sector participation, and rising export capabilities.
It initiated coverage on the defence sector with Hindustan Aeronautics Lt (HAL) its top pick, followed by Bharat Electronics Ltd (BEL), BEML Ltd, and Bharat Dynamics Ltd (BDL) in that order of preference.
Emkay Global said India has made unprecedented strides in the defence sector over the past decade, driven by strong policy focus on self-reliance and domestic manufacturing.
A sharp rise in production and exports in the sector underscores India’s growing capabilities as a global defense manufacturing hub, Emkay said.
"With production reaching a record Rs 1.8 lakh crore and exports rising to Rs 38,000 crore in FY26 for the sector, India has demonstrated its commitment toward reducing import dependence while strengthening its global presence; for 2029, the country targets Rs 3 lakh crore worth of production and Rs 50,000 crore worth of exports," Emkay said.
The domestic brokerage said such achievements and goals highlighted India’s emergence as a reliable global defence partner
Hindustan Aeronautics | BUY |Target: Rs 5,950 | Upside: 23% HAL will see improvement in operational performance with execution of the LCA Tejas MKIA order; this should help it deliver earnings CAGR of 13 per cent over FY26-29E. We initiate coverage on the stock on the back of strong long-term earnings visibility, coupled with a robust over 20 per cent return ratio profile, benign valuation, and the stock trading at 32x its H1FY29E EPS.
Bharat Electronics BUY | Target price: Rs 500 | Upside: 26% Emkay said BEL’s consistent execution track record, high R&D expenditure toward scaling up indigenisation levels, increasing electronics content in defense equipment, and a pipeline of large-ticket programs provide confidence that it can continue delivering mid-teen earnings growth in coming years.
Bharat Dynamics | ADD | Target price: Rs 1,350; Upside: 13% Increasing competition and higher R&D expenditure are expected to put pressure on margins in the near term. Given its premium valuation and mixed execution track record, Emkay initiated coverage on BDL with 'ADD' rating.
BEML Ltd | BUY | Target price: Rs 2,600 | Upside: 24% Emkay said BEML offers rare exposure to three structurally distinct growth vectors. A Rs 21,700 crore order book anchors near-term revenue visibility through to FY29, while a pipeline of opportunities across MRVC AC EMUs, aluminium push-pull trainsets, and six live metro tenders provides long-term revenue visibility. With increased execution of high-margin orders, we expect margins to expand meaningfully over FY26-29E, Emkay said.