Active Stocks
Tue Jun 18 2024 13:03:06
  1. Tata Steel share price
  2. 181.70 -0.74%
  1. State Bank Of India share price
  2. 848.50 0.99%
  1. Power Grid Corporation Of India share price
  2. 331.20 3.02%
  1. HDFC Bank share price
  2. 1,606.50 0.57%
  1. Wipro share price
  2. 491.90 3.05%
Business News/ Markets / Stock Markets/  Defence stocks to benefit from 84,560-cr contract from defence ministry, says Nuvama; picks BEL, HAL, Data Patterns
BackBack

Defence stocks to benefit from ₹84,560-cr contract from defence ministry, says Nuvama; picks BEL, HAL, Data Patterns

According to Brokerage Nuvama, India has been observing and adapting the strategies employed in recent wars in Russia, Israel, and Armenia. Private players across the defence value chain would benefit by becoming tier 2/3 component suppliers.

Brokerage house Nuvama Institutional Equities states that the Ministry of Defence had taken a tactical move based on lessons learned. Photo: BloombergPremium
Brokerage house Nuvama Institutional Equities states that the Ministry of Defence had taken a tactical move based on lessons learned. Photo: Bloomberg

In order to improve India's defence needs and infrastructure, the defence Acquisition Council (DAC) authorised contracts on Friday, February 16, totalling over 84,560 crore.

In its report, brokerage house Nuvama Institutional Equities stated that the Ministry of Defence had taken a tactical move based on lessons learned. The report highlighted that private players across the defence value chain would benefit by becoming tier 2/3 component suppliers, with Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL), and Bharat Dynamics Ltd being the main beneficiaries.

Also Read: Defence stocks rise as DAC sanctions 80,000 crore project; HAL up 2%; MTAR Tech, Bharat Forge see sharp gains

According to Brokerage Nuvama, India has been observing and adapting the strategies employed in recent wars in Russia, Israel, and Armenia. These strategies stress the importance of large defence systems, but they also recognise that modern warfare is fought strategically, employing cutting-edge technology-enabled systems (as evidenced by the current Acceptance of Necessity) to neutralise large weapon systems (which are expensive and valuable).

“We like Bharat Electronics (‘HOLD’), HAL (not-rated) and Data Patterns (not-rated) in the defence space from a longer-term structural perspective," the brokerage said.

"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!

Moreover, the brokerage emphasised that the values of private defence equities and public sector undertakings (PSUs) are trading over +2 SD going forward. PE (base is last 2-3Y median) because of re-rating; nonetheless, since order books are at an all-time high, the brokerage thinks working capital management and execution are the main drivers.

Also Read: Indian stock market: BEL to HAL — Why defence stocks will be in focus on Monday?

“We stay optimistic on India’s transformational phase in the defence sector; however, earnings need to ramp-up in order to justify current valuation premiums," the brokerage said.

DAC approved AoNs over past two years.
View Full Image
DAC approved AoNs over past two years. (Nuvama Research)

According to the brokerage, the Defence Acquisition Council has cleared the Acceptance of Necessity (AoNs) for a number of capital acquisition bids totalling 84,560 crore under the Buy (IDDM) category for the following purchases. 

Also Read: Paytm share price hits 5% upper circuit as it moves nodal account to Axis Bank

  • Kalyani Group's (Bharat Forge) latest generation of anti-tank mines. 
  • Canister launched Anti-Armour Loiter Munition System- Elbit Security Systems' Harop loitering munition, created in Israel, is now being used by India. Private manufacturers like Alpha Design, among others, may profit from this.
  • Bharat Electronics, Astra Microwave, and Data Patterns together made up the Air Defence Tactical Control Radar.
  • Hindustan Aeronautics (HAL) offers MRMA and Multi-Mission Maritime Aircraft.
  • The Army purchased six Active Towed Array Sonar devices from German company Atlas Elektronik in 2014. Bharat Electronics produced the equipment in India.
  • Heavy weight torpedoes from Bharat Dynamics and Bharat Electronics (to improve the assault capability of Kalvari Class submarines).
  • The Hindustan Aeronautics flight refueller aircraft. ICG - Bharat Electronics, Alpha Design software-defined radios.

Also Read: Are PSU stocks riding a bubble? mixed results cast doubt on the rally

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

 

 

3.6 Crore Indians visited in a single day choosing us as India's undisputed platform for General Election Results. Explore the latest updates here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 19 Feb 2024, 02:36 PM IST
Next Story footLogo
Recommended For You
GENIE RECOMMENDS

Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

Let’s get started