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Business News/ Markets / Stock Markets/  BEL, BDL shares surge 6%: Why experts are bullish on defence stocks — explained
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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

The MoD has signed multiple contracts worth over ₹35,000 crore with Indian shipyards Bharat Dynamics, Bharat Electronics, and BrahMos Aerospace for equipment. (iStock)Premium
The MoD has signed multiple contracts worth over 35,000 crore with Indian shipyards Bharat Dynamics, Bharat Electronics, and BrahMos Aerospace for equipment. (iStock)

Shares 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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ABOUT THE AUTHOR
Meghna Sen
Business journalist tracking markets, companies, economy and crypto for Livemint. She has 6 years of experience with online and print publications. Email: meghnasen08@gmail.com
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Published: 31 Mar 2023, 01:11 PM IST
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