The defence sector is entering another phase of order activity. The brokerage house Antique is betting on three names that could benefit as large contracts move closer to finalisation. Hindustan Aeronautics (HAL), Bharat Electronics (BEL) and Mazagon Dock Shipbuilders are among the brokerage’s preferred defence stocks.
The brokerage expects major programmes such as the P-75(I) submarine project, Quick Reaction Surface-to-Air Missile (QRSAM) system and Next Generation Corvette to move forward.
But what could drive these stocks higher? Let’s take a look at the investment rationale driving the call on these defence stocks.
According to the Antique report, the Ministry of Defence approved Acceptance of Necessity (AoN) proposals worth Rs 6.7 lakh crore in FY26.
However, actual order inflows for listed Defence Public Sector Undertakings (DPSUs) fell around 17% year-on-year as some large programmes were delayed.
Antique expects this slowdown to be temporary.
“We believe that the contractual negotiations for these orders have been largely completed, paving the way for final clearance from the CCS,” added the brokerage in its report.
The P-75(I) programme is estimated at around Rs 90,000 crore, while QRSAM and the Next Generation Corvette programmes are estimated at around Rs 30,000 crore and Rs 33,000 crore, respectively.
Antique has retained a Buy rating on Hindustan Aeronautics, with a cited target price of Rs 6,026 against a current market price of Rs 4,924. This points to an upside of around 22%.
The brokerage sees a long runway for HAL as India works to modernise its ageing fighter fleet.
The Indian Air Force currently operates around 31 squadrons against a planned strength of 42. The replacement of older aircraft such as Mirage 2000, Jaguar and MiG-21 could create demand for more than 300 aircraft over the next decade or more.
Antique said, “HAL being a monopoly play in defence aerospace would emerge as one of the key beneficiaries of the ordering momentum.”
The brokerage is also watching the supply of General Electric engines for the Tejas Mk-1A. It expects engine deliveries to improve, supporting aircraft deliveries and revenue growth.
Bharat Electronics has emerged as the brokerage’s highest-upside pick among the three.
At a current market price of Rs 399 and a target price of Rs 532, the stock has an indicated upside of around 33%.
The company is positioned in defence electronics and has increasingly moved towards system integration. That could become important as electronic systems form a larger part of modern warfare.
The QRSAM programme could be a key near-term trigger.
Antique expects the around Rs 30,000 crore QRSAM order to be finalised in the second quarter of FY27. The brokerage believes BEL could potentially see order inflows exceeding Rs 60,000 crore, including other expected contracts.
The brokerage house in its report added, “We believe BEL is in a sweet spot given the sharp increase in spending on missile systems like QRSAM and MRSAM.”
Mazagon Dock Shipbuilders has a target price of Rs 3,275 against a current market price of Rs 2,530. This translates to an upside of around 29%.
The key trigger here is submarines.
The brokerage expects the P-75(I) programme involving six submarines to move closer to an order placement. It also expects three additional Scorpene-class submarines to be ordered.
Together, these opportunities could be worth Rs 1.3 lakh-1.4 lakh crore, according to the report.
As per the brokerage report, “The total order funnel is estimated to be INR 2.9 trillion plus, almost 14x current order book.”
The three calls are built around different parts of India’s defence spending cycle. HAL is positioned around aircraft and aerospace, BEL around defence electronics and missile systems, while Mazagon Dock is focused on submarines and naval platforms.
Antique said, “We maintain BUY on HAL, MDL, and BEL.”
Antique Stock Broking has also given a ‘Buy’ rating to Bharat Dynamics, Zen Technologies, Solar Industries India and PTC Industries.
Bharat Dynamics could benefit from more missile orders. The brokerage expects the company to gain from orders for Man Portable Anti-Tank Guided Missile (MPATGM) systems and Medium Range Surface-to-Air Missile (MRSAM) programmes.
Solar Industries India and PTC Industries could benefit from the overall increase in defence spending.
Zen Technologies is focused on defence technology, including anti-drone and surveillance systems. Antique expects demand for these products to support the company’s growth.
For Bharat Dynamics, Antique Stock Broking has set a target price of Rs 1,597 per share. For Zen Technologies, the brokerage has a target price of Rs 2,000 per share. It has set a target of Rs 21,408 per share for Solar Industries India, while PTC Industries has a target price of Rs 24,415 per share.