As the new year unfolds, the defence sector is poised to be a beacon of strength for investors, building on the significant gains of 2023. Antique Stock Broking, a prominent brokerage, anticipates sustained momentum in defence stocks and recommends seven key players to fortify portfolios in 2024. The sector’s robust transformation in 2023, marked by substantial gains, positions it as a resilient force amid global uncertainties.
Antique Stock Broking forecasts an impressive order inflow Compound Annual Growth Rate (CAGR) of 29%, a substantial jump from the previous 10%. Additionally, the sector’s revenue and earnings are expected to witness a CAGR of 17%, reflecting a positive trajectory from 16% and 15%, respectively. The brokerage’s optimism stems from a growing order book, a healthy pipeline, and the government’s strong focus on indigenisation.
The recommended stocks include mid-to-largecaps such as Hindustan Aeronautics (HAL), Bharat Dynamics, Bharat Electronics, Mazagon Dock Shipbuilders, Garden Reach Shipbuilders & Engineers (GRSE), BHEL, and Larsen & Toubro (L&T). Each stock is accompanied by Antique’s analysis and target prices.
1. BHEL: Revitalizing Orders and Exponential Growth
Antique anticipates a significant turnaround for BHEL in the next 3-4 years, driven by both non-power and power segments. The brokerage expects BHEL’s total order intake to triple during FY24-26, leading to exponential earnings growth. The revised target price of INR 230 suggests a nearly 19% potential upside.
2. Larsen & Toubro (L&T): Strategically Positioned for Capex Revival
L&T, a key player in infrastructure, is well-positioned to benefit from the investment cycle and operational improvements. Antique maintains a Buy rating with a revised target price of Rs 4,214, indicating up to 19.5% potential upside.
3. Hindustan Aeronautics (HAL): Pivotal Role in Modernizing Armed Forces
With India’s armed forces modernization plans, HAL is expected to play a pivotal role. The stock is deemed attractively valued, with a potential upside of nearly 29%, as per the revised target price of Rs 3,615.
4. Bharat Dynamics (BDL): Steady Inflow and Strong Operational Performance
As the production agency for DRDO’s missile development program, BDL is set for continued momentum. A Buy rating is maintained with a revised target price of INR 2,038, signaling a potential upside of nearly 19%.
5. Bharat Electronics (BEL): Electronic System Integration for Defence Services
BEL, a key electronic system integrator, is well-positioned with a robust order book and pipeline. With a target price of Rs 221, the stock has a potential upside of over 20%.
6. Mazagon Dock Shipbuilders: Optimistic About Future Orders and Capacity Utilization
Mazagon Dock remains a favourite, with optimistic projections for future orders and capacity utilization. A Buy rating is retained with a target price of Rs 2,833, suggesting over 24% potential gains.
7. Garden Reach Shipbuilders & Engineers (GRSE): Chasing Growth with Execution Trajectory
GRSE has the potential to scale up its execution, and the brokerage foresees revenue and net profit CAGR of 27% and 19%, respectively. A Buy rating is maintained with a revised target price of Rs 1,005, indicating nearly 15% potential upside.
Disclaimer: The recommendations are based on market analysts’ opinions, and investors are advised to consult certified experts before making any investment decisions.
