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 business in the long run attributable to greater budgetary allocation and deal with self-reliance.

The brokerage agency is optimistic concerning the development prospects of the sector because of the authorities’s deal with growing defence manufacturing and the curiosity of worldwide corporations in India OEM (authentic gear producer) for manufacturing.

“We stay constructive on India’s defence business in the long run. Within the listed house, we favor Hindustan Aeronautics, Bharat Electronics and Bharat Dynamics on the PSU facet,” 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 corporations usually are not underneath the brokerage’s agency’s ranking.

The brokerage agency underscored that Defence Minister Rajnath Singh has expressed confidence in attaining 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 worth: ₹5,160 | Upside potential: 57%

In keeping with 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 is able to be led by two giant orders for 97 LCA Tejas Mk 1A along with 83 already ordered, and 156 gentle fight helicopters (LCH) Prachand collectively value ₹1.3 lakh crore, that are prone to materialize within the subsequent three to 6 months, Elara mentioned.

Moreover, orders value ₹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 complete anticipated inflows to just about ₹1.7 lakh crore for FY26, the brokerage agency added.

Bharat Electronics (BEL) | Purchase | Earlier shut: ₹256.65 | Goal worth: ₹370 | Upside potential: 44%

The brokerage agency identified that Bharat Electronics has retained order influx steering of ₹25,000 crore for FY25 regardless of year-to-date inflows of ₹11,900 crore up to now.

The corporate expects order momentum to proceed in FY26 with the receipt of a giant order of fast response surface-to-air missiles (QRSAM) value ₹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 presently stands at ₹71,000 crore as of January 2025. Additionally it is growing its presence in high-growth areas, equivalent 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 worth: ₹1,360 | Upside potential: 33%

Bharat Dynamics has a strong orderbook and robust order pipeline. The corporate seems to be 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 could publish a 30 per cent gross sales CAGR throughout the subsequent two to 3 years, aided by the execution of each home and export orders. The present capability utilization is almost 60 per cent.

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