Nuvama Initiates Coverage on HAL, BDL, and Data Patterns with BUY Ratings. Brokerage Forecasts 22% Growth in the Defense Sector.
Defence Stocks: Nuvama Institutional Equities has initiated coverage on Hindustan Aeronautics Limited (HAL), Bharat Dynamics Limited (BDL), and Data Patterns, recognizing the significant growth potential within India's expanding defense sector. The brokerage firm believes these companies are poised for up to 22% growth in the coming years, driven by the Indian government's indigenization policy and increasing exports.
Potential Highlighted in BEL, HAL, and BDL
Following a recent downturn, defense stocks are showing signs of b recovery. Nuvama has assigned a 'BUY' rating to top defense PSUs like BEL, HAL, and BDL. Following this coverage, shares of these companies saw a surge of up to 4% on the BSE on Monday, April 21st.
HAL: Target Price ₹5,150, Estimated 20% Upside
Nuvama has set a target price of ₹5,150 for HAL. The stock closed at ₹4,307 on Monday, suggesting a potential upside of approximately 20%. This is still below the 52-week high of ₹5,675.
Bharat Dynamics: Target ₹1,650, BUY Rating Maintained
The brokerage has set a target price of ₹1,650 for Bharat Dynamics (BDL). Its stock closed at ₹1,429.85 on Monday, indicating a potential upside of approximately 16%. However, this remains below its previous year's record high of ₹1,794.70.
Data Patterns: High-Tech Defense Play, Target ₹2,300
Nuvama has set a target price of ₹2,300 for Data Patterns, representing an 18% increase from Monday's closing price. The company is considered a leader in the defense electronics segment in India.
HAL vs. BEL: Which to Buy?
While HAL is a leading defense company, Nuvama favors BEL. The brokerage cites BEL's superior execution capacity, ber operating profit margin, return on equity (RoE), and cash flow, along with comparatively lower risk.
$130 Billion Opportunity in India's Defense Sector
Nuvama anticipates a nearly $130 billion opportunity in the defense sector over the next five years, with significant contributions from the Indian Air Force and Navy. Modernization and technological upgrade projects are expected to drive this sector's growth.
Highest Growth Potential Seen in Defense Electronics
Nuvama projects the defense electronics segment to grow at a CAGR of 7-8% in the coming years, 1.5 to 2 times faster than the overall defense budget growth. This growth is expected to be further fueled by anticipated improvements in CY25 and large projects in the pipeline.
