BEL, BDL shares surge 6%: Why experts are bullish on defence stocks — explained
The brokerage prefers Bharat Electronics as its top pick in the defence space and has maintained a 'Buy' tag with a target price of ₹125
PremiumShares of defence companies surged over 6 per cent in Friday's intra-day trade after the Ministry of Defence (MoD) approved a number of orders in the last week of FY23, benefitting PSUs such as Bharat Electronics, Bharat Dynamics, Garden Reach Shipbuilders & Engineers, Cochin Shipyard and Goa Shipyard.
Shares of Bharat Electronics (BEL) rose 6.42 per cent to trade at ₹97.36 apiece on the BSE, while Bharat Dynamics (BDL) was trading 3.22 per cent higher at ₹985.90.
Garden Reach Shipbuilders & Engineers soared 5.98 per cent to ₹457.55 and Mazagon Dock Shipbuilders Ltd shares rallied 2.73 per cent. In comparison, the S&P BSE Sensex was up 1.43 per cent to 58,787.93 at 12:54 pm.
The MoD on Thursday signed multiple contracts worth over ₹35,000 crore with Indian shipyards Bharat Dynamics, Bharat Electronics, and BrahMos Aerospace for equipment.
Most of these orders are under the Indian-IDMM category, in line with the government’s focus on indigenisation, said domestic brokerage ICICI Securities. Hence, the brokerage expects consequential benefits for downstream companies in radars, instrumentation and surveillance systems such as BEL and Data Patterns. The orders comprise the much-awaited backlog for BDL, BEL and Shipyards, it said.
The brokerage prefers BEL as its top pick in the defence space and has maintained a 'Buy' tag with a target price of ₹125. The current awarding of orders by the MoD may benefit BEL the most, followed by BDL. In case of BEL, apart from the direct award of ₹11,830 crore worth of orders, additional opportunities from AWS, NGOPV and NGMV are also possible, it said.
Taking cognisance of better earnings outlook for BDL, the brokerage has revised its target price to ₹1,175 on DCF valuation from ₹955 earlier. The brokerage has also revised BDL's recommendation to 'Buy' from 'Add' earlier.
The companies Cochin Shipyard, Goa Shipyard and Data Patterns are 'Not rated'.
ICICI Securities' defence stock picks -
Bharat Electronics (BUY), Target Price: ₹125
Bharat Dynamics (BUY), Target Price: ₹1,175
GRSE (REDUCE), Target Price: ₹385
MDSL (SELL), Target Price: ₹600
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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