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

Brokerage agency Elara Capital is constructive on India’s defence trade in the long run on account of greater budgetary allocation and concentrate on self-reliance.

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

“We stay constructive on India’s defence trade in the long run. Within the listed house, we want 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, Knowledge Patterns, Azad Engineering, Astra Microwave Merchandise and Maini Precision Merchandise. Nonetheless, these firms will not be beneath the brokerage’s agency’s ranking.

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

Furthermore, the Union Funds 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 e book to ₹2.5-2.6 lakh crore, up from ₹1.3 lakh crore as of December 2024.

This may 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 price ₹1.3 lakh crore, that are prone to materialize within the subsequent three to 6 months, Elara mentioned.

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

Indian Multi-Position 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 steerage 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) price ₹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 e book at present stands at ₹71,000 crore as of January 2025. It’s also rising its presence in high-growth areas, comparable to arms and ammunition, AI, cyber safety, unmanned techniques, 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 strong orderbook and powerful order pipeline. The corporate appears 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 might publish a 30 per cent gross sales CAGR in the course of the subsequent two to 3 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 instructional functions solely. The views and suggestions above are these of particular person analysts or broking firms, not Mint. We advise traders to examine with licensed consultants earlier than making any funding choices.