ICICI Securities released its monthly update on the defence sector on Tuesday.
What Happened: The brokerage was bullish on the sector, saying it has witnessed an improvement in defence ordering following the Lok Sabha elections and the stocks in the sector have healthy order pipelines. The brokerage noted that the firms’ managements have forecast a 15%–25% revenue growth for FY25 and maintained margins for key metrics.
Amongst the defence public sector firms, the brokerage had no "buy" call but had an "add" recommendation for Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL) with a target price of ₹5,170, ₹300 and ₹1,745 respectively.
HAL has recently obtained an ₹1,173 crore contract from Cochin Shipyard to supply six gas turbines for the Indian Navy's next-generation missile vessel project, among other orders, ICICI Securities noted. The research firm was positive on BEL's ₹3,172 crore order win from AVNL to supply and install 693 sighting and fire control systems for the modernisation of vehicles for the Indian Army.
However, it underscored that BDL faced risks due to supply chain constraints caused by geopolitical factors.
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ICICI had a "sell" recommendation for Garden Reach Shipbuilders and Engineers Limited (GRSE) and Mazagon Dock Shipbuilders Limited (MDSL) with a target price of ₹515 and ₹900, respectively.
Amongst the private players, Solar Industries, Astra Microwave and Azad Engineering were the brokerage's top picks with the respective target price of ₹13,250, Astra Microwave ₹935 and Azad Engineering ₹1,750. Dynamic Technologies also had a "buy" call with a target price of ₹10,250
Price Action: Most defence stocks were in the red on Monday afternoon.
Shares of HAL were down 1.75% at ₹5,408. BEL was trading 1.03 lower at ₹328. BDL was down 1.55% at ₹1,603.50.
Garden Reach Shipbuilders lost 1.03% to trade at ₹2,470.50 and Mazagon Dock Shipbuilders was trading 0.26% down at ₹5,378.20.
Solar Industries shed 1.83% to trade at ₹11,793.05, Astra Microwave was down 0.58% at ₹921.85 and Azad Engineering lost 1.35% to trade at ₹1,677.60
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