The stock market is abuzz with speculation on potential fiscal measures and their impacts ahead of the Union Budget 2024 presentation on July 23.
Defence stocks such as Bharat Electronics Ltd (BEL), Hindustan Aeronautics Ltd (HAL), Bharat Dynamics Ltd (BDL), Cochin Shipyard Ltd, and Data Patterns India Ltd, are in focus on Monday morning as the Union Budget 2024, which is scheduled for Tuesday, July 23, is expected to see higher allocation for the sector.
To recall, Finance Minister Nirmala Sitharaman announced a budgetary allocation of Rs 1.72 lakh crore towards FY25 defence capital expenditure in her interim Budget 2024, which was 20.33 per cent higher than the actual expenditure of FY23 and 9.40 per cent more than the revised allocation of FY24.
Multibagger Solar Industries , Astra Microwave and Azad Engineering are the top picks of ICICI Securities in the Defence Sector. Solar Industries, Astra Microwave, Azad Engineering share price have risen 147-217 per cent in last one year giving Multibagger returns to investors.
We continue to remain positive on the sector, as the order pipeline for most of the companies remains healthy and managements have guided for 15–25 per cent revenue growth while maintaining the margins for FY25, said ICICI Securities in its report.
ICICI Securities also has a BUY rating on Dynamatic Technologies share Price with a target price of Rs 10,250. However, they await the award of the Pinaka order, which they believe is in advanced stages; Solar Industries share price is also the likely beneficiary. Also, they await the orders for QRSAM and MRSAM (Quick reaction and medium range Surface-to-Air Missiles ) which are likely to benefit Bharat Electronics, Bharat Dynamics and and Astra Microwave share price.
The ordering activity has been catching pace in last one month post the completion of Lok Sabha Elections.
Key developments in the month of June’2024 included the first Tejas Mk-1A aircraft is expected to be delivered in Jul’24.while Hindustan Aeronautics ltd also has received a Request for proposal from the Ministry of Defence on the procurement of 156 LCH Prachand helicopters. Hindustan Aeronautics Ltd has won orders worth Rs 1170 Crore from Cochin shipyard.
Garden Reach Shipbuilders & Engineers Ltd has won orders worth Rs 1910 Crore order while Bharat Electronics has won orders worth Rs 3170 Crore as per ICICI Securities data. Cochin shipyard also has won orders worth Rs 1100 Crore while Solar industries has developed three new explosives.
The target price of Solar Industries share price at Rs 13250 by ICICI Securities indicates more than 13 per cent upside for the stock from current market price of Rs 11710. For Astra Microwave share price , target of ₹935 and Azad Engineering share price target of Rs 1750 are 2-4 per cent higher than current levels at which these share prices are trading and hence any corrections may be good opportunity to Buy.
Prabhudas Lilladher expects higher allocations towards aircraft, engines, and vehicles. Ministry of Defence will also continue its thrust on exports, having announced a Rs 50,000 crore defence export target by FY29, it said.
This brokerage said India’s defence story remains intact due to unrelenting focus on enhancing domestic production capabilities, improving technology of arms and armaments and push for exports.
It sees increased order inflow in segments like fighter aircraft, helicopters, armoured vehicles, missiles and naval platforms. Each platform will require new electronics such as advanced avionics, radars, fire control systems, as well as various ancillary equipment, it said.
This brokerage said a sustained focus would keep defence stocks such as HAL, BEML, BEL, Mazagon Dock Shipbuilders, Bharat Dynamics, GRSE, Data Patterns and Cochin Shipyard buzzing.
Ahead of the Budget 2024, MOFSL initiated coverage on Zen Technologies, calling it a niche player in the defense simulator-based training market.
“The company has also forayed into the counter-drone market. The addressable markets for simulators and counter-drones in India are estimated at Rs 14,000 crore and Rs 12,000 crore, respectively, over the next five years. The company commands a significant market share in both of these segments, with just 2-3 players in the defense simulator market and 5-6 players in the counter-drone market,” it said.
Fisdom Research said stocks such as BEL, HAL and DDL to be on investor radar.
Stay informed with our comprehensive coverage of Union Budget 2024. Get the latest on new income tax slab rates for AY 2024-25 in Income Tax Slabs Budget 2024 LIVE Updates . Track the impact of Budget 2024 on the stock market in Stock Market Budget Day 2024 LIVE Updates.
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