HAL, Bharat Electronics, Bharat Dynamics: Top defence stocks to buy/hold | Mint
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Business News/ Markets / Stock Markets/  HAL, Bharat Electronics, Bharat Dynamics: Top defence stocks to buy/hold
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HAL, Bharat Electronics, Bharat Dynamics: Top defence stocks to buy/hold

Key top defence stock picks of ICICI Securities are HAL, BEL, BDL

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The increase in domestic procurement will directly benefit domestic players including defence PSUs and private players in terms of more order inflows during the year for major platforms & sub-systems/components, said ICICIDirect in a note.

“As per estimates, orders worth 5-6 lakh crore will be placed with Indian defence players in the next four to five years. Defence PSUs like Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL) and Bharat Dynamics Ltd (BDL) are poised to do well considering they already have a strong order backlog of 3-4x of TTM revenues and a healthy pipeline of orders," the note stated.

Valuations of these three companies look attractive on FY25E earnings considering strong visibility on order execution and balance sheet of these defence companies remains debt free with working capital support from the government, as per the brokerage and its top defence stocks picks are HAL, BEL, BDL.

“We expect HAL to deliver revenue and EBITDA CAGR of 10.3% and 14.8%, respectively, in FY22-25E. PAT is likely to grow at ~12% CAGR (FY22-25E). Increase in profitability with strong asset turnover is expected to result in healthy return ratios over FY23-24E. We continue to remain positive on HAL and retain our BUY rating on the stock with a target price of 3,300," ICICIDirect suggested.

With the strong order backlog and healthy pipeline, it expects BEL's revenue, EBITDA to grow at a CAGR of 17.9%, 18.9%, respectively, in FY22-24E aided by sustained margins in the range of ~22% and remains positive on BEL and retain BUY rating on the stock with a target price of 130.

“We expect BDL to deliver revenue and EBITDA CAGR of 20.4% and 19.9%, respectively, in FY22-25E. PAT is likely to grow at 23.5% CAGR (FY22-24E). Increase in profitability with strong asset turnover is expected to result in healthy return ratios over FY23-24E. We retain BUY on BDL with a revised target price of 1,215," it added.

Meanwhile, the brokerage has HOLD on Mazagon Dock shares with a revised target price of 745 while has retained BUY rating on Data Patterns stock with a target price of 1,670 and BUY rating on Cochin Shipyard with a target price of 620.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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Published: 04 Apr 2023, 01:06 PM IST
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