Defence shares to purchase for long run: Elara Capital sees 44-57% upside in Hindustan Aeronautics, Bharat Electronics

Brokerage agency Elara Capital is optimistic on India’s defence trade in the long run attributable to increased budgetary allocation and concentrate on self-reliance.

The brokerage agency is optimistic concerning the development prospects of the sector because of the authorities’s concentrate on rising defence manufacturing and the curiosity of worldwide corporations in India OEM (unique gear producer) for manufacturing.

“We stay optimistic on India’s defence trade in the long run. Within the listed house, we desire Hindustan Aeronautics, Bharat Electronics and Bharat Dynamics on the PSU aspect,” mentioned Elara Capital.

Among the many non-public sector companies, Elara Capital prefers Zen Applied sciences, Information Patterns, Azad Engineering, Astra Microwave Merchandise and Maini Precision Merchandise. Nonetheless, these corporations will not be beneath the brokerage’s agency’s score.

The brokerage agency underscored that Defence Minister Rajnath Singh has expressed confidence in attaining the home defence manufacturing (DDP) goal of ₹1.6 lakh crore and exports at ₹30,000 crore by FY26.

Furthermore, the Union Price range 2025-26 allotted ₹6.8 lakh crore to the Ministry of Defence, which incorporates ₹1.8 lakh crore for capital acquisition.

Defence shares to purchase

Hindustan Aeronautics (HAL) | Purchase | Earlier shut: ₹3,287.40 | Goal value: ₹5,160 | Upside potential: 57%

In response to Elara Capital, Hindustan Aeronautics’ administration expects the FY26 order ebook to ₹2.5-2.6 lakh crore, up from ₹1.3 lakh crore as of December 2024.

This is able to be led by two massive orders for 97 LCA Tejas Mk 1A along with 83 already ordered, and 156 mild fight helicopters (LCH) Prachand collectively value ₹1.3 lakh crore, that are prone to materialize within the subsequent three to 6 months, Elara mentioned.

Moreover, orders value ₹35,000 crore are set to accrue for Su-30 MKI improve,

Indian Multi-Function Helicopter (IMRH) design and improvement and repairs and overhaul (ROH) orders, taking whole anticipated inflows to almost ₹1.7 lakh crore for FY26, the brokerage agency added.

Bharat Electronics (BEL) | Purchase | Earlier shut: ₹256.65 | Goal value: ₹370 | Upside potential: 44%

The brokerage agency identified that Bharat Electronics has retained order influx steering of ₹25,000 crore for FY25 regardless of year-to-date inflows of ₹11,900 crore so far.

The corporate expects order momentum to proceed in FY26 with the receipt of a big order of fast response surface-to-air missiles (QRSAM) value ₹25,000 crores.

Elara Capital expects the corporate’s margin to maintain round 24-25 per cent within the upcoming years, led by higher margin orderbook.

“The order ebook presently stands at ₹71,000 crore as of January 2025. It’s also rising its presence in high-growth areas, corresponding to arms and ammunition, AI, cyber safety, unmanned programs, and rail and metro. The corporate targets to extend its share of non-defence within the upcoming years,” Elara Capital famous.

Bharat Dynamics | Accumulate | Earlier shut: ₹1,023.70 | Goal value: ₹1,360 | Upside potential: 33%

Bharat Dynamics has a sturdy orderbook and powerful order pipeline. The corporate appears to be like to double its manufacturing within the upcoming three to 5 years and triple its manufacturing within the subsequent 10 years, Elara Capital mentioned.

The brokerage agency believes the corporate could put up a 30 per cent gross sales CAGR in the course of the subsequent two to a few years, aided by the execution of each home and export orders. The present capability utilization is sort of 60 per cent.

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Disclaimer: This story is for academic functions solely. The views and proposals above are these of particular person analysts or broking corporations, not Mint. We advise buyers to test with licensed consultants earlier than making any funding selections.