Antique Bullish On Defence Companies Like HAL, BDL And BEL After Defence Ministry's 5th Positive Indigenisation List Release

Antique Stock Broking maintained a bullish stance on defence companies such as Hindustan Aeronautics, Bharat Dynamics, Bharat Electronics and Bharat Earth Movers after the defence ministry released the fifth Positive Indigenisation List (PIL) consisting of 346 items.

What Happened: On July 16, the Defence Ministry notified the PIL to help minimise imports by defence public sector undertakings (DPSUs). The list contains strategically important line replacement units, systems, sub-systems, assemblies, sub-assemblies, spares and components and raw materials, with import substitution value worth ₹1,048 crore. 

In the notification, the Ministry said, that more than 12,300 items were indigenised in the last three years and DPSUs placed orders worth ₹7,572 crore on domestic vendors.

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Analyst View: Antique maintained a "buy" call on defence stocks such as Hindustan Aeronautics with a target price of ₹6,145, Bharat Dynamics with a target price of ₹1,643, Bharat Electronics with ₹339, Bharat Earth Movers Limited at ₹5,216. 

The brokerage said the PIL will reduce the import bill for the government as India is currently the second largest importer of defence equipment in the world. The analysts added that the scheme will also help develop the domestic defence sector and make it ready for the export market. The brokerage sees ₹50,000 crore in exports by FY29 from ₹21,000 crore in FY24.

According to the research firm, the steps taken by the government like the development of two defence corridors, 74% foreign direct investment (FDI) under the automatic route and five PIL for defence items which will promote making defence items domestically are positive for the defence stocks. 

Defence stocks have been sitting on strong order books. Companies like Hindustan Aeronautics, Bharat Electronics and Mazagon Dock Shipbuilders between ₹38,000 crore and ₹94,000 crore. Recently there were reports that Mazagon Dock Shipbuilders and Garden Reach Shipbuilders were in contention to get a ₹70,000 crore order for warships for the Indian Navy from the Defence Ministry.

The defence stocks have been under pressure in the past few sessions. The sell-off in the stocks has largely been attributed to profit booking and early jitters ahead of the budget.

Price Action: Shares of HAL fell 2.29% to ₹4,901.

Shares of BDL fell 3.30% to ₹1,495.35.

Shares of BEL were down 0.97% to ₹310.50.

Shares of BEML fell 1.57% to ₹4,747.90.

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