India’s defence-linked stocks like Hindustan Aeronautics Ltd., Data Patterns Ltd., and Bharat Electronics Ltd. can gain up to 40% over the next 12 months as the country ramps up its defence spending, according to analysts.
Brokerage firm Jefferies believes that global geopolitical tensions and India’s rising focus on self-reliance is fueling order flow and revenue growth for domestic defence companies.
As a result, the brokerage has initiated coverage on stocks like Hindustan Aeronautics (HAL) and Data Patterns, while retaining its positive stance on Bharat Electronics.
For Hindustan Aeronautics, Jefferies sees a potential upside of 15%, while shares of Data Patterns may rise up to 38% over the next 12 months.
India’s defence exports hit a record level of ₹21,083 crore for financial year 2024.
Jefferies believes that this government focus on building country-to-country relations to promote defence exports is the “icing on the cake.” The brokerage is anticipating domestic defence spend to double between financial year 2024 – 2030.
Defence exports from India can rise to $7 billion by financial year 2030, according to Jefferies.
Hindustan Aeronautics reported its highest ever revenue of ₹29,810 crore for financial year 2024, which is a growth of 11% compared to financial year 2023.
Bharat Electronics also achieved a record turnover of ₹19,700 crore for financial year 2024, a growth of 13% from last year.
Jefferies believes that Data Patterns revenue should rise 5x between financial year 2024 to 2030 a indigenisation and export pipeline benefits the company.
For Hindustan Aeronautics, its product business should rise faster as the government is encouraging domestic aircraft manufacturing.
Brokerage firm UBS also believes that Hindustan Aeronautics’ management commentary reflects optimism for new orders in financial year 2025 and is expecting major order wins. It has maintained a “buy” rating with a price target of ₹3,600 for HAL.
While Bharat Electronics’ missed its sales guidance for the year, its new orders were up by 74%. UBS is expecting Bharat Electronics to deliver an improved topline growth compared to consensus over the coming years.
Jefferies also expects Bharat Electronics to benefit from the defence opportunity with zero debt and comfortable working capital position. It has also maintained its “buy” rating with a price target of ₹260.
Shares of Hindustan Aeronautics Ltd. are up 150% over the last 12 months, while those of Data Patterns have risen 80%.
